Digital Transformation and sustainability

DIGITAL TRANSFORMATION AND SUSTAINABILITY: STUDY AND ANALYSIS

BY

VIKAS CHANDOLA

CAMBRIDGE, MASSACHUSETTS 2015

This is a capstone research paper, submitted to Harvard University, Extension Studies in candidacy for the degree of Master of Liberal Arts (ALM) in Sustainability

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Abstract Significant advancements in communications technology and wide availability of internet has resulted in what is dubbed as the Digital age, marked by large volumes of a variety of data created at ever increasing speeds. This is creating digital imperatives for transformation, impacting an organization’s Supply and Demand, and Operations. In this new age of technology revolution, Digital Transformation is the new way of doing business by leveraging Digital technologies such as Cloud, Big Data, Mobile computing, Social computing, and Analytics resulting in significant improvements in Operational Efficiencies and Customer Experiences. Since the way business gets done has an Environmental, Social and Economic footprint, Digital Transformation impacts the Sustainability aspects of doing business. This is important for organizations since consumers, share-holders and other stakeholders have visibility to business impacts on Brand Value, Revenues and Company Valuation. This capstone project focuses on understanding the link between Digital Transformation and Sustainability. The approach includes, survey of industry perspectives on the subject, review of industry Case Studies, understanding existing frameworks on Digital Transformation and Sustainability, and review of Case scenarios as a proxy for business situations. The study concludes that Digital Transformation significantly impacts Sustainability aspects of an organization and that both should form an integral part of Organizational Strategy. Digital technologies are not only transforming markets and creating new paradigms of doing business, the technologies are also providing solutions to organizations for addressing Sustainability challenges.

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Acknowledgments

This page has been left blank on purpose.

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Table of Contents Abstract ........................................................................................................................................... ii Acknowledgments.......................................................................................................................... iii List of Tables ................................................................................................................................. vi List of Figures .............................................................................................................................. viii Abbreviations and Definition of Terms .......................................................................................... x Introduction ..................................................................................................................................... 1 Background ..................................................................................................................................... 6 Digital and Sustainability............................................................................................................ 6 Historical Perspective ................................................................................................................. 6 Digital Transformation Technologies ....................................................................................... 10 Impacts of Digital Transformation............................................................................................ 15 Additional Perspectives and Analysis ....................................................................................... 17 Methods......................................................................................................................................... 20 Library Resources ..................................................................................................................... 22 Analysis ..................................................................................................................................... 23 Timelines ................................................................................................................................... 23 Data and Results ........................................................................................................................... 24 Business Problems..................................................................................................................... 24

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Creating a Case for Digital Transformation Driving Sustainability – Studies and Frameworks ................................................................................. 29 Creating a Case for Digital Transformation Driving Sustainability – Case Studies ............... 43 Survey Results ........................................................................................................................... 73 Limitations of the Study ............................................................................................................. 85 Discussions, Conclusions, and Recommendations ....................................................................... 86 Discussions and Conclusions .................................................................................................... 86 Recommendations...................................................................................................................... 92 References ................................................................................................................................... 107 Poster........................................................................................................................................... 106 Appendix I .................................................................................................................................. 118

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List of Tables Table 1. Cloud Platforms .............................................................................................................. 11 Table 2. Big Data Platforms.......................................................................................................... 13 Table 3. Impact Areas in Analytics............................................................................................... 14 Table 4. Social Computing Aspects .............................................................................................. 15 Table 5. Examples of Digital Transformation .............................................................................. 16 Table 6: Business Models ............................................................................................................. 25 Table 7. Management Focus Area: Strategy ................................................................................. 26 Table 8. Management Focus Area: Operations............................................................................. 27 Table 9. Management Focus Area: Organization ......................................................................... 28 Table 10. Management Focus Area: Finance ............................................................................... 28 Table 11. Management Focus Area: External Forces ................................................................... 29 Table 12. Percentage of Firms using Digital Technologies to Enhance Customer Experience and Improve Operational Efficiencies ....................................... 32 Table 13. Benefits from Digital Transformation .......................................................................... 35 Table 14. Digital Re-shapes Every Aspect of Modern Enterprise ................................................ 36 Table 15. Digitization Maturity Model ......................................................................................... 37 Table 16. Selected Firm Performances in the IMT Industry ........................................................ 42 Table 17. Data from remaining 3 Quadrants of Fuse-Bang Framework ...................................... 42 Table 18. Digital Transformation Impacts – Derived from Case Studies..................................... 43 Table 19. Digital Transformation Case Studies ............................................................................ 45 Table 20. Sustainable Replacements enabled by Digital Transformation .................................... 69 Table 21. Annual Energy Savings in million barrels of Oil Equivalent ....................................... 69

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Table 22. ICT solutions based Sustainability Impacts .................................................................. 72 Table 23. Additional Respondent Comments ............................................................................... 84 Table 24. Frameworks for Analyzing Case Scenarios .................................................................. 95 Table 25. Case Scenarios, Consulting companies, and Business Schools .................................... 96 Table 26. Examples of Case Problems with Inclusion of Sustainability Aspects ........................ 98 Table 27. Additional Digital Mastery Categories ....................................................................... 100 Table 28. Traits of Digital Officer – CIO and CDO ................................................................... 105

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List of Figures Figure 1. Impact Areas of Digital Transformation ......................................................................... 3 Figure 2. Building Blocks of Digital Transformation ..................................................................... 7 Figure 3. Case Framework for New Product Introduction ........................................................... 19 Figure 4. Evolution of Digital Transformation ............................................................................. 30 Figure 5. Deloitte-MIT study ........................................................................................................ 31 Figure 6. Digital Leaders Outperform Peers on Characteristics that matter most for Success ..... 33 Figure 7. Digital Reinvention Framework .................................................................................... 38 Figure 8. Projected DigicalSM Transformation by Industry through 2020 .................................... 40 Figure 9. Digital Disruption Map.................................................................................................. 41 Figure 10. Providers investing in New Tools for supporting Systemized Care............................ 66 Figure 11. Start-Ups changing the Rules of the Game ................................................................. 67 Figure 12. Industry-wise Breakdown of Responses ..................................................................... 74 Figure 13. Distribution of Responses in terms of Revenues ......................................................... 75 Figure 14. Response to use of Digital Transformation ................................................................. 76 Figure 15. Response to Business Benefits from Digital Transformation Efforts ......................... 78 Figure 16. Response to Functional areas addressed by Digital Transformation Projects ............. 78 Figure 17. Response to Functional Group Engagement with Corporate CSR Program and Strategy ................................................................ 79 Figure 18. Response to CSR Reporting ........................................................................................ 80 Figure 19. Response to CSR Standards ........................................................................................ 81 Figure 20. Response to CSR Adoption Drivers ............................................................................ 81 Figure 21. Response to Sustainability projects by Functional Groups ......................................... 83

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Figure 22. Response to Relationship between Digital Transformation and Corporate Sustainability ............................................................. 83 Figure 23. Change Framework ..................................................................................................... 93 Figure 24. Digital Maturity Matrix ............................................................................................. 100 Figure 25. Digital Transformation Matrix .................................................................................. 102

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Abbreviations and Definition of Terms ACEEE

American Council for Energy-Efficient Economy

B2B

Business to Business

B2C

Business to Consumer

CDO

Chief Digital / Data Officer

CEO

Chief Executive Officer

CFO

Chief Financial Officer

CIO

Chief Information Officer

CMMS

Computerized Maintenance Management System

CRM

Customer Relationship Management

CSCP

Collaborating Centre on Sustainable Consumption and Production (http://www.scp-centre.org/)

CSR

Corporate Social Responsibility

CTO

Chief Technology Officer

EHR

Electronic Health Records

EHS

Environmental Health and Safety

EHSMS

Environmental Health and Safety Management System

EPA

Environmental Protection Agency

EU-5

European Union Five consisting of France, Germany, Italy, Spain, United Kingdom

GDP GDSN GeSI

Gross Domestic Product Global Data Synchronization Network Global e-Sustainability Initiative (http://gesi.org/)

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GHG

Green House Gas

GRI

Global Reporting Initiative

HBR

Harvard Business Review

HR

Human Resources

IaaS

Infrastructure as a service - "standardized, highly automated offering, where compute resources, complemented by storage and networking capabilities are owned and hosted by a service provider and offered to Customer’s on-demand." (adapted from Gartner http://www.gartner.com/it-glossary/?s=iaas)

ICT

Information and Communications Technology

IIoT

Industrial Internet of Things

IPaaS

Integration platform as a service - "suite of cloud services that enables development, execution, and governance of integration flows connecting any combination of on-premises, and cloud based processes, services, applications and data within individual or across multiple organizations" (adapted from Gartner – http://www.gartner.com/it-glossary/information-platform-as-a-service-ipaas)

ISO IT MIT Mt NGO OHSAS

International Organization for Standardization Information Technology Massachusetts Institute of Technology Million tons Non-governmental organization Occupational Health & Safety Advisory Services (http://www.ohsas.org/)

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PaaS

Platform as a service - "broad collection of application infrastructure (middleware) services (including application platform, integration, business process management and database services) – (adapted from Gartner - http://www.gartner.com/it-glossary/?s=paas)

P&C

Property and Casualty

P&G

Procter & Gamble (www.pg.com)

R&D

Research and Development

SaaS

Software as a service - software that is owned, delivered and managed remotely by one or more providers and the provider delivers software based on one set of common code and data definitions that is consumed in a one-to-many model by all contracted customers at any time on a pay-foruse basis or as a subscription based on use metrics (adapted from Gartner – http://www.gartner.com/it-glossary/?s=saas)

SEM

Sustainability and Environmental Management

SNS

Secured Network Services

TBR

Technology Business Research (http://www.tbri.com/)

UN

United Nations

UNFCCC

United Nations Framework Convention on Climate Change

WEF

The World Economic Forum (http://www.weforum.org/)

WWF

World Wild Life (www.worldwildlife.org)

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Introduction Commercial computing in form of Information and Communication Technology, also referred as ICT, has been evolving since 1945 (Ceruzzi, 2003), characterized by technology changes over the years, from mainframes, mini-computers to the integrated chip revolution and more recently personal computers. This evolution in technology has impacted businesses in many ways. Product lifecycles have shortened with efficient supply chains and significant improvements in process efficiencies. ICT has provided the means for global logistics and communication to work with humungous amounts of data moving at ever-faster speeds, enabling large organizations to be agile. The most significant change in the industry started in early 2000’s with the advent of Digital Transformation. In the early 2000’s, most regions of the world were spending between 5% and 7% of the GDP on various forms of Information Technology (IT). By 2011, of the global economy valued at $65.6 trillion, a significant $3.9 trillion was being spent on IT. In the same year, more than 60% of the global population had access to a digital technology in the form of mobile cell phones (Cortada, 2012). Digital Transformation is a recent paradigm enabled by the proliferation of Digital Technologies such as Analytics, Mobile Computing (mobility), Social Computing, and Cloud Computing. These technologies are enabling shifts that are resulting in reductions in total cost of ownership of IT due to shared infrastructures and broadband communications. Much like electrical utilities, Cloud Computing is helping deliver computing power over cloud technology, making it available, as a utility. Enterprises are adopting Analytics for optimizing resource deployments and managing risk. The demands for “instant interaction and coordination, and

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emphasis on lean manufacturing and minimum inventory, are reinforcing the need for e-business (mobility) solutions, first class logistics and broadband connectivity” (Hanna, 2010). A white paper created jointly by MIT Sloan and Cap Gemini (Fitzgerald, 2013) refers to Digital Transformation as an environment where everything for an organization is connected, creating digital imperatives for companies to create transformation through technology impacting Customer Experience, Operational Improvement and Business Model Change thus covering an organization’s Supply side, Demand side and Operations (Figure 1). Mobile computing is becoming an enabler for new forms of innovation through transformation, management of the knowledge environment, and enabling of demand driven Supply Chains (Hanna, 2010). Digital Transformation is helping in optimization of Supply Chains, and Operations, faster processing of information and knowledge, optimization of raw materials usage, and reducing energy consumption. Digital Transformation is thus, not only impacting the organizations profitability goals, in an increasingly competitive environment, but is also impacting the Sustainability aspects of business such as the increasing concern on global warming and pollution impacts of business. A major enabling factor for Digital Transformation growth has been the easy accessibility of internet, with the number of users accessing internet growing from 300 million to over 2 billion (Callou, 2014), over the past decade, paradoxically resulting in growing demands for computing and communication capabilities requiring larger capacities and highly efficient and evolved Data Centers so that carbon footprint can be cut by an order of magnitude. This has driven the traditional view of the relationship between Sustainability and Information Technology. Some of the current views about Green IT are focused on reducing energy consumption of Corporate IT systems (Dao, 2011), enablement of stand-alone green Supply 2

Chain (Sabbaghi, 2012), green adoption of IT Capability Maturity Model framework (Jarmoszko, 2013), IT virtualization (Bose, 2011), IT enabled occupancy detection (Dong, 2010), and creation of energy efficient Data Centers (Sharma, 2008). These approaches toward Sustainability and Information Technology have resulted in stand-alone projects with some benefits. These are, however, not designed for “urgent action” (Watson, 2011). Digital Transformation, on the other hand, results in business benefits by taking an integrated approach towards IT, Supply chain, Operations and other functions of an organization, leading to delivery of sustained value, reductions in costs, improvement in operational efficiencies, and creating a sense of urgency.

Figure 1. Impact Areas of Digital Transformation (Fitzgerald, 2013) 3

Adoption of Digital Transformation as strategic to Organizational Sustainability, though, has been slow. Most of the research linking the two has been in recent couple of years, in specific areas such as Shipment analytics (Coraddu, 2013), Hospital Occupancy Analytics (Bacon, 2014 and Shams, 2013), Analytics in Infrastructure and Buildings (Starkey, 2013), Analytics applied to Supply Chain (Waller, 2013 – 2 papers), Power Consumption in Manufacturing Predictive Analytics (Shin, 2014), and impact of use of Predictive Analytics tools to manage Big Data for improved Productivity and Transparency in Manufacturing (Lee, 2014). Some research has taken a holistic view of integrating Business Excellence with Sustainability such as Integration of Business Excellence with assessment of Triple Bottom Line (Edgeman, 2013), and Innovation as a strategic driver for Sustainability (Jelinek, 2013). The large upside opportunity that Digital Transformation provides to organization’s in efforts towards greater Sustainability is still nascent and supported by limited recent research. The year 2015 will, perhaps in the years to come, be seen as a watershed year for the adoption of Sustainability measures to address the Global Climate Change challenges. There is an acknowledgement in the corporate world about doing business in a sustainable way, as reflected from actions of the 767 mainstream investors seeking Sustainability related disclosures from companies through the Carbon Disclosure Project (CDP, 2014). There is a growing acceptance of the realities of the threat and leaders on both sides of the argument willing to take a serious view on the subject. Central to the proposals and discussions at the forthcoming Paris meet on Global Climate Change is creation of legal frameworks, public financing, and setting up of Sustainability goals and a “central role for equity” (Aid, 2014). The recently released encyclical letter by Pope Francis states, “To protect and improve our world entails profound changes in lifestyles, models of production and consumption” (Francis, 2015). The Pope’s

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statement maps well with what can be achieved through Digital Transformation. This capstone report studies the association between Digital Transformation and Sustainability, within organizations, based on case studies, survey feedbacks from various organizations, results from other digital studies and study of various available frameworks. Based on this data, the capstone presents a case and recommendations for considering the link between Digital Transformation and Sustainability to drive Corporate Strategy.

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Background

“Digital capabilities have helped Nike to improve visibility and performance in its operations, increasing efficiency, reducing waste, and enhancing Corporate Social Responsibility in the company’s global Supply Chain.” (Westerman, 2014). Digital and Sustainability Digital capabilities such as Unified Data, Analytics, and Digital frameworks enable integration of Business and IT, impact Customer Experience, and Operational Processes. This results in increased productivity, higher revenues, and cost reductions. An example is the framework defined by Cap Gemini (2011), Figure 2, on the impact Digital capabilities has on Customer Experience, Operational Processes, and Business models. Many aspects defined in the framework such as streamlined customer processes, cross-channel coherence, self-service, Performance Improvement, worker’s being able to work Anywhere Anytime with broader and faster communication, Operational Transparency, transition from physical to digital, and Enterprise Integration, in fact, also impact the Sustainability aspects of doing business. Historical Perspective Over the past five decades, Digital and Sustainability have evolved with few touchpoints and little acknowledgement of the influence that one has on the other. Digital Technology journey over the years has seen an evolution in Computer Technologies. Sustainability has evolved from covering just the Social aspects to a wider canvas that includes Social, Environmental and Economic aspects.

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Figure 2. Building Blocks of Digital Transformation (Cap Gemini, 2011) 7

The first phase of the Digital Technology journey started about mid of the 20th century and lasted till the early 1990’s, just about the time when Internet became a major digital driver (Cortada, 2012). The second phase started with the advent of the Internet Age. Though Internet existed in the 1970’s, wide spread adoption of this technology started in the 1990’s. Three events in the 1980’s triggered this, introduction of networking by Cisco, arrival of Personal Computers by IBM and introduction of Desktop Computing Operating System by Microsoft. These events transformed the world by linking computing and network and the evolution of new forms of computing. The computing power got more and more distributed with faster computers. The subsequent phases started with the replacement of micro-computers with powerful Desktops, development of Gaming technology and more recently adoption of the Mobile technology. Recognition of Sustainability as a subject goes back several decades. Haas (1973) stated that organizations have, besides performing its usual functions, increased responsibilities for “pollution control, charitable foundations, assistance to the disadvantaged and to educational institutions”. Estes (1976) stated that an organization should not just focus only on customer’s demand and shareholder value. Estes further reported a research by Ernst and Young on number of companies from a set of 500 that reported social measurement disclosures between the years 1971 and 1973. Epstein (1977) defined Social Accounting as the identification, measurement, monitoring, and reporting of the Social and Economic effects of an institution on society. The performance parameters measured by Epstein were along Social lines and included Community involvement, Human Resources, physical resources, environmental contributions, and the contributions by product or service to society and to customers. These surveys show an early recognition among organizations on Social Accounting.

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Over the decades, Sustainability benefits linked to Digital growth, though acknowledged cursorily, has been emerging. For example, the percentage contribution of Information Technology to capital productivity was determined as 0.15% for the period 1948-1973, 0.40% for the period 1973-1989, 0.50% for the period 1989-1995, and 0.90% for the period 1995-2002 (Cortada, 2012). There are differences between the early recognition of Social responsibility and more recent adoption of Corporate Social Responsibility (CSR) approaches. The earlier frameworks were narrow in scope, considered few elements as being relevant, few parameters were defined for objective measurements and the focus was mainly on Social, with some Economic and very few Environmental aspects. Recent standards, tools, and frameworks for Sustainability such as GRI, and CDP reporting, Life Cycle Analysis (LCA), and Sustainability Finance and Investments tools were just beginning to evolve. Greenhouse gas (GHG) emission inventory measurements and frameworks as defined by The Climate Registry (CR, 2015), and standards such as ISO 14000, BS 26000 were non-existent. None the less, it does show the genesis of interest among organizations in taking a serious look at what later developed into a more comprehensive CSR approach. Eco-justice impacts of doing business is another aspect drawing CSR attention. Recent research on the topic by Dayal-Gulati, et al (2007), and Peter Fisk (2010, 2013) have covered this, highlighting the cost to organizations of ignoring efforts in establishing practices aligned to Global Labor standards, sustainable Supply Chains, and Animal welfare. Fisk has set this in the context of steep rising trends in population, economic wealth, globalization, water consumption, paper consumption, transportation, deforestation, carbon emissions, and reduced biodiversity, based on data from WEF, WWF, and New Scientist to postulate that “economic growth is only 9

sustainable if business activities are integrated with Social and Environment priorities” (Fisk, 2010 and Fisk, 2013). Digital Transformation Technologies Technologies enabling Digital Transformation include Cloud Computing, Mobile Computing, Big Data, Data Sciences and Business Analytics, and Social Computing. These are explored further in this section. Cloud Computing: Migration to “the Cloud”, implies movement of data from servers that are located on premise to another remote facility that provides shared services of storage (Mahmood, 2013) and computing power, resulting in a drop in storage costs, computing power costs, and providing instant access from anywhere to vast amounts of data via multitude of devices, resulting in global collaboration, and accelerating speeds of doing business. The cloud technology has changed over the years with improved security protocols. This has led to creation of metadata based frameworks, architecting of scientific data systems in the Cloud, and migration of systems to Private, and Public Cloud. Private refers to hosting the cloud within organizational boundaries, whereas Public refers to cloud infrastructure outside the organizational boundaries. Another form is Hybrid Cloud wherein some systems are hosted on Public and some in Private Cloud settings. This move from a distributed state to a central location forms the core of Cloud Computing. Sustainability advantages from Cloud Technologies are Operational flexibility, business scalability, and standardization of technology. It has also enabled multiple “As-a-Service” revenue models such as Software (SaaS), Infrastructure (IaaS), Platform (PaaS), and Integration (IPaaS) as a service, with the user paying only for the services provided. This has created new

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paradigms in the use of IT by businesses and is also resulting in efficient use of resources. Table 1 lists some popular cloud platforms. Table 1. Cloud Platforms (Based on: Happiest Minds, 2015) (All names in the table registered with the respective companies) Software as a

Infrastructure as a

Platform as a

Integration Paas

Service (SaaS)

Service (IaaS)

Service (PaaS)

(IPaas)



Sales Force



Amazon Web



Force.com



IBM Cloud



Microsoft

Services



Heroku



Cloud hub

HP Cloud



Open Shift



Dell Boomi

Services



Stackato



Mule Soft



Google App



Snap Logic

Office 365





Google Apps



Windows



Rackspace

Azure



Softlayer



Vmware



Open Stack



Cloud Stack

engine 

Bean stalk

One of the very popular Cloud application is Customer Relationship Management (CRM) with enterprise solutions such as Sales Force, and Sugar CRM. Adoption of CRM has transformed the Customer Relationship Management function in organizations through crossfunctional integration, collaboration and application of Predictive Analytics. Mobile Computing: Mobile computing has proved to be an extremely disruptive technology innovation and has significant Sustainability impacts. In a recent Pew Research Center release (Smith, 2015), nearly two thirds of Americans now own a smartphone and over 7% of Americans rely heavily on a smartphone for online access. This percentage is rapidly increasing. The kinds of 11

information being accessed is growing exponentially and includes among others Health, Online Banking, Real-Estate listings, Job information, Government services, and Education. It is the first place for seeking information on breaking news, and for sharing information. Some of the technology aspects of Mobile Computing include Text Messaging, Internet use, Voice / Video calls, email, video, music access, and SNS. Cloud also plays a role here by providing internal systems access over multitude of mobile devices. With availability of faster bandwidths, large quantities of data can now be accessed over these devices. Some of the direct Sustainability impacts of this technology are Field-Force Productivity improvements, Workforce Automation, and Enterprise collaboration. Big Data: Big Data and Analytics tools are enabling assimilation and extraction of intelligent information from large volumes of varied data at very high speeds. Houle (2012) has predicted volumes of data to increase from 7.5 zettabytes in 2015 to 12,000 zettabytes in 2040. This exponential growth is being driven by the proliferation of devices that can communicate with other devices, also referred as Internet of Things (IoT), with new channels of data creation such as Mobile, Web, Store fronts, and electronic devices. The volume, velocity, and variety of data is growing at such a humungous pace that conventional IT platforms for Business Intelligence and Reporting are not adequate enough. This has led to availability of a whole new suite of products. The key is in gaining insights from a diverse data set, through effective aggregation, integration, and validation of the data and application of analytical techniques. The churning of data using analytical tools, adoption of methodologies, and workflows that can work with this diverse data has become feasible with the advent of Big Data platforms. These tools are helping organizations get significant business insights that were missing earlier. Table 2 provides information on 12

available platforms for the four stages in Big Data management - Capture, Store, Process, and Analyze. Table 2. Big Data Platforms (Based on: Happiest Minds, 2015) (All names in the table registered with the respective companies) Capture stage

Storage of Data

Processing of Data

Analysis of Data

stage

stage

stage



Flume



Cloudera



Apache Solr





Pentaho



Hadoop



Storm



Apache Kafka



Horton Works



Apache Tika



Mahout



Apache HBASE



Lucene



Python



Cassandra



Qlik View



Mongo DB



Tableau

Revolution Analytics

Data Sciences and Business Analytics: Big Data has led to the adoption of technologies that provide smart Business Analytics solutions to help understand data and optimize it context of a business thus leading to connected and truly smart enterprises. Some examples of such effective applications in Banking, Insurance, Retail, and Transportation sectors are Fraud Detection and Prevention and Enhancement of Customer Experience. Some key impact areas driving businesses, are presented in Table 3.

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Table 3. Impact Areas in Analytics (Based on: Happiest Minds, 2015) (All names in the table registered with the respective companies) Customer

Marketing

Analytics

Analytics



Acquisition



Customer



Web Analytics

Analytics 

Credit Scoring

and Targeting



Price

Sales

&

Marketing

Elasticity/

Forecasting

Conversion

/Segmentation

Mix

Optimization

Inventory

Analysis

Customer

Modeling

Life Time





Value



Campaign Effectiveness



Fraud

Demand

Management

Detection 









Stock

Traffic Analysis

Visitor Segmentation



Claim

Replenishment

Price &

Frequency/

Analysis

Loyalty

Promotion

Severity

Customer

Strategy

Modeling

Campaign

Collection and

Optimization

(CLTV) and 

Operational

Segmentation

Behavior



Risk Analytics

Retention





Cross-sell/Up-



sell

User Personalization



Multi-Channel

Recovery Analysis 

Customer Retention

Tools * Revolution R * SPSS * Omniture * IBM ILOG * Google Analytics * SAS * Revolution Analytics

Social Computing: The focus of Social Computing is increasing peer to peer exchange over the three phases, shown in Table 4. These phases are Understanding, Engagement between the peers, and Peer to Peer Influence. These are especially relevant to customer facing industries such as Retail, Consumer Product companies and Banking. 14

Table 4. Social Computing Aspects (Based on: Happiest Minds, 2015) Understand Phase  

Customer Service



Gamification For Increased Customer and

Brand Reputation

Social Media Platforms

Employee Engagement



Collaboration with



Next generation Loyalty:

Competitive Intelligence

Channel Partners,

Rewarding Customers

and Benchmarking

Resellers & Suppliers

beyond Transactions



Enterprise Social Collaboration

360 Degree view of customers



Increased Brand Engagement & Reach On

Dashboards 



Influencing Phase

Reporting and Dashboards

dashboard 

Engagement Phase



Customer Communities:

Social User Data analytics

From Research to Game-

and dashboards

Changing Insights

Impacts of Digital Transformation This section covers the impacts of adopting various Digital elements covered in the previous sections. Some of the impacts include improvement in productivity, and reduction in costs, resulting in Sustainability benefits. Table 5 provides more of such examples.

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Table 5. Examples of Digital Transformation (Based on: Westerman, 2014) Company

Capital One, USA

Digital Digital Impact Technology Consumer Mobile and Single view of the Products Analytics customer and improvement in experience across all channels, media, and platforms Entertainment Social, Value Chain impact Mobile, from customer Cloud, awareness, Analytics distribution, sales, pricing Consumer Mobile and Customer engagement Products Social e.g. Payment through mobile device Banking Analytics Effective market Segmentation

Codelco, Chile

Mining

KimberlyClark

Consumer Products

Mobile, Analytics and Embedded devices Data Analytics

Apple, USA

Technology

Cloud

Burberry, UK

Caesars Entertainment, USA

Starbucks, USA

Industry

Sustainability Impact Efficient shopping experience across channels

Waste reduction, better customer decisions

Reduction in resources usage and costs reduction Best mobile payment options available to customers Mining operations Improvements of improvements through mining productivity, Automation Worker safety, Environmental protection Demand driven supply Clearer visibility to chain demand trends reducing losses and waste Deployed iTunes Reinvent business model to deliver music reducing materials usage across industry

Digital Transformation is also re-defining business segments such as in Travel and Transportation. Airbnb (Kurtz, 2014) today is the world’s largest hotel chain without owning a 16

single real estate and Uber (Goodwin, 2015) is the world’s largest taxi company without owning a single taxi. Both companies have effectively used Cloud and Mobile computing technologies to derive completely new business models. When applied on a global scale, it translates to better Customer Service, Improved Efficiencies in use of resources, aspects that make the world more sustainable. Additional Perspectives and Analysis While the urgency of adopting Digital Transformation strategies for business growth is gaining wider recognition, its relation to an organization’ Sustainability efforts has been mostly incidental, rather than a result of conscious strategy. The role that Digital Transformation is playing in improving Sustainability aspects of business in areas such as Supply Chain, Operations, and the Demand side, are not necessarily recognized by organizations. Sustainability resulting from Digital Transformation are typically in the form of stand-alone projects or as a by-product of initiatives for cost reduction (Shin, 2014, Lee, 2014). At one end of the opinion spectrum is a view from Fleming (2013) that states frameworks of doing business, intrinsically, are not aligned with the CSR principles since organizations are designed to focus on profit-making driven by self-interest, leading to predatory corporate practices that weigh down on CSR efforts. Fleming has provided an example of how Shell had infiltrated local governments in Nigeria which was in direct contradiction to the company’s stated commitment to CSR. On the other end of the opinion spectrum are organization’s that are rebranding to be “ecologically responsible” (Dayal, 2007), using significant aspects of Digital Transformation. Some of these are: a. General Electric’s Eco-Imagination initiative b. Procter and Gamble pioneering disability and retirement benefits 17

c. Corporate philanthropy in the form of the “5 percent club” that include brands like Levi Strauss, Cummins Engines (original source: Vogel (2005)) For Sustainability to be a conscious and deliberate part of Corporate Strategy would require inclusion of Sustainability aspects into Strategy frameworks, enabled by Digital elements. Some of these frameworks include Porter’s Five Forces (Porter, 2008), 4 P’s of Marketing by Neil Borden (Borden, 1984), Profitability Analysis, and Three C’s analysis (Ohmae, 1988). These can be modified to include Sustainability aspects. As an example, Figure 3, presents the Three C’s framework for a new product introduction. In this example, the Sustainability aspect could be incorporated by adding an additional element, “Sustainability impact of the Product” and applying Digital tools for Environmental and Social Life Cycle Assessment to the 4P’s (Product, Price, Promotion, and Place), Assessment of Competition, and the Analysis of Feasibility of a Product. This rest of this report focuses on building an understanding of Digital Transformation’s impact on Sustainability, review of Strategy Frameworks and incorporation of Digital Transformation elements into these frameworks leading to significant Sustainability impacts.

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Figure 3. Case Framework for New Product Introduction (Source: Kenan-Flagler Business School Consulting Club, nd)

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Methods Several sources have been used for collating data to establish the link between Digital Transformation and Sustainability. These included Harvard library resources including Hollis and Hollis+, internet sources such as Google Scholar, and an anonymous corporate survey. There are four aspects to the Methods used in the capstone. The first was a review of over 200 digital case studies. This was collated from various sources including book reviews (representative list of books in Box 1), and internet searches (websites of large Consulting companies and others). The second was a survey conducted to get corporate perspectives on Digital Transformation and Sustainability. This was an anonymous survey to middle management and senior management executives from various functional areas of about 150 Fortune organizations. The third aspect covered understanding of typical business situations. For this case scenarios were used as a proxy. A comprehensive study of cases from leading management schools and Consulting companies were considered, resulting in a review of over 500 case scenarios. The fourth aspect was review of Digital frameworks proposed by, among others, various Consulting companies and included research and white papers from Harvard library resources and consulting company websites. Digital Case studies: Real life case studies on Digital Transformation were studied from websites of various Consulting companies. This was then collated in a table form to study common elements that relate to the Sustainability aspects of business.

20

Box 1 List of few books reviewed for the capstone project: 

Global Corporate Citizenship, Anuradha Dayal-Gulati and Mark W. Finn (2007)



People, plant, profit: how to embrace Sustainability for Innovation and Business Growth, Peter Fisk (2010)



A Manual for Writers of Research Papers, Theses, and Dissertations, Kate L. Turabian (2013)



Leading Digital, Turning Technology into Business Transformation, George Westerman, Didier Bonnet, Andrew McAfee (2014)



Case In Point, Complete Case Interview Preparation, Marc P. Cosentino (2011)



Case Study Research, Design and Methods, Robert K. Yin (2003)



Cite Right, A Quick Guide to Citation Styles, Charles Lipson (2006)



The Craft of Research, Wayne C. Booth, Gregory G. Colomb, Joseph M. Williams (2008)



A History of Modern Computing, Ceruzzi P.E. (2003)



The Digital Flood: Diffusion of Information Technology across the United States, Europe, and Asia, Cortada, J. W. (2012)



Corporate Social Performance: The Measurement of Product and Service Contributions, Marc J. Epstein, Eric G. Flamholtz, John J. McDonough (1977)



Corporate Social Computing, Estes R & Buckley J.W. (1976)



The end of Corporate Social Responsibility: Crisis & critique, Fleming, P., & Jones, M. T. (2013)



Enabling Enterprise Transformation: Business and Grassroots Innovation for the Knowledge Economy, Hanna N. (2010)



Entering the Shift Age, Houle D. (2012)



Crack the Case System: Complete Case Interview Prep Paperback, Ohrvall D. (2015)



The market for virtue: The Potential and Limits of Corporate Social Responsibility, Vogel D. (2005)

21

Survey Responses from companies: Survey questionnaires were sent to Department, Function and Sustainability heads of organizations. The database created used information from LinkedIn and other data sources. A questionnaire was sent from Harvard email id to about 150 companies spread over three cycles each with a gap of about one week. Each mailer was followed by a reminder in about a week’s time after sending. The survey responses were anonymous with responses to a Google Form and no identifying information. The survey was in the form of multiple choices seeking information on the following: 

Industry type



Revenue bracket



Executive level in the organization



Functional area of the executive



Questions on Digital Transformation as relates to the Functional area



Questions on the organization’s CSR efforts A copy of the survey questionnaire is enclosed in Appendix I. An exemption from

Harvard University Human Subjects Committee was secured before proceeding with the survey. Library Resources Use of Harvard library resources included Hollis, Hollis+ and onsite libraries including Harvard Law School, Lamont, Baker and Widener. Reviews included: 

Books review: Several books on the subjects of Digital Transformation, ICT and Sustainability were reviewed, Box 1.



Research papers - Study of research papers on Digital and Leadership capabilities.

22

Analysis The data collected from the surveys, reference books, and research papers were collated and analyzed to seek common themes between Digital parameters, Business processes and Sustainability. Since the focus is on Digital Transformation rather than the inter-relationship between traditional Information Technology technologies such as Enterprise applications and Business Processes, the analysis of the data focused mainly on impacts of Digital Transformation elements which are Social Computing, Mobile Computing, Analytics, Customer Relationship Management and Cloud Computing, on Business Processes and impact types were then characterized in terms of Sustainability impacts, where applicable. The survey data was used to validate the findings from research and an analysis of relationships between Digital Transformation factors, Functional areas, and Sustainability elements. The two sets of analysis were the basis for Common Themes, Results and Conclusions. Timelines

This section has been left blank on purpose.

23

Data and Results Data and Results, presented in this section, are based on two parts. The first is organizational perceptions about Business Problems. Case problems with elements of Sustainability are considered as a proxy for business situations. The second is the Business Case for Digital Transformation as a driver for Sustainability. Digital Transformation studies, Frameworks and Case Studies are used as a proxy for creating the Business case. Impacts and result areas that had some Sustainability elements were selected from these studies. Business Problems In most organizations, there are five areas requiring constant management oversight. These are Strategy, Operations, Processes, Finance, and External Forces (derived from Ohrvall, 2015). Management has to address the challenges and issues posed in each area, determine the right set of answers and adopt the right management models. Here we consider some of the typical industry frameworks / models used to address these five areas, as shown in Table 6. The last three columns in the table are likely Sustainability impacts on applying each model. The issues associated with each of the five management areas with issues involved and results sought by the management (some with Sustainability aspects)) are covered in the following tables: 

Table 7 for Strategy



Table 8 for Operations



Table 9 for Organization (Processes)



Table 10 for Finance



Table 11 for External Forces.

24

Table 6: Business Models (Mind Tools, 2015) Framework/ Model McKinsey 7S model

Porter’s Five Forces Analysis

The Marketing Mix and 4P’s of Marketing and variants 7P’s and 4C’s models

Elements

Purpose

Improvement in performance of organization.

Likely Impact * E En S x x

Likely effects of future changes within a company.

x

x

x

Align departments and processes during merger / acquisition.

x

x

x

Best way to implement a strategy.

x

x

x

Powerful model for understanding a business situation in terms of strength of current position versus strength of intended position.

Know the areas of strength, improve on a situation of weakness and avoid wrong steps.

x

x

x

Make new products, services or businesses with potential to be sustainable over the long run and profitable.

x

x

x

Getting the right mix of the elements for a new product or service.

Having the right understanding of what customer wants and what needs does the product / service fulfill.

x

x

x

      

Strategy Structure Systems Shared Values Skills Style Staff

Need to align and mutual reinforcement of the seven elements

   

Supplier Power Buyer Power Competitive Rivalry Threat of Substitution Threat of new entry Product Place Price Promotion People Process Physical Layout Customer needs Cost Convenience Communication

           

Result area

Getting the right features that appeal to the customer and with an understanding of how and where the customer will use it.

x

Having the right branding that clearly differentiates with the competitors.

x

What are the right distribution channel/’s.

x

Having the right price in terms of customer sensitivity, and competition.

x

* E – Economic, En – Environment, S - Social 25

x

x

Table 7. Management Focus Area: Strategy (Based on: Ohrvall, 2015) Element

Issues

Merge,  Acquire,  Joint Venture      Growth Strategy

New Business or Product

New Geography or Market

                 

How is the economy doing? How are competitors responding to the strategy? Is this strategic approach common in the industry at this time? Operations - how big are new sales? What are customers expecting? People - How will the integration be handled? Finance - How will the financing happen? How heavily will the company be leveraged? What are the growth opportunities? Are competitors changing their strategies? Is the industry landscape changing? Any legislative consequences? What are the sources of funds? What is the new direction, and product? What is the demand? Any raw materials problems? Availability of right people? How will distribution happen? How will finance happen? What is the demand? Will suppliers have enough raw materials? What is the current market share? Barriers to entry in the new geos? How good are internal staff? How will distribution happen? How is the company's debt / equity impacted?

26

Results sought by management (some with Sustainability aspects)  Market share increase and sales increase.  Maximize synergies.  Greater reach for the company's product offerings.  Combination of diverse skills and areas of technical expertise.





Profit increase thru strategic growth (market segmentation, niche opportunities). Access to new technology.



Success of the new business / new product launch.

 

Domain experience in new product. Familiarity with new market.

Element Exit a Business or Market

Issues    

Impact on costs and revenues over long term. Organization readiness. Competitor’s status with similar product lines. Impact on remaining employees.

Results sought by management (some with Sustainability aspects)  Better focus on other divisions and product lines.  Help streamline operations and remove extra costs.

Table 8. Management Focus Area: Operations (Based on: Ohrvall, 2015) Element

Issues

Profit  Maximization  

  Changed Pricing

     

Results sought by management (some with Sustainability aspects)  Profits and revenue increases.  Reduced costs.  Better prices.

Breakdown of revenues, profits by geo and product. How revenues are increased (price, volume, new products)? How can cost be brought down? o Is outsourcing an option? o What costs are fixed and what are variable? o How do costs benchmark? Comparison of costs and revenues with competitors. What are the actions that increase revenue and reduce cost significant? What is current pricing based on – Cost In current pricing model – or is it market driven?  Price elasticity. Price sensitivity.  Premium pricing. What is competitor's pricing?  Transfer pricing model and its impact How do prices compare to industry on profits to offshore subsidiaries. pricing? How is price affected by supplier actions? How to change price and its relation to volume?

27

Table 9. Management Focus Area: Organization (Based on: Ohrvall, 2015) Element Streamlining of processes

Issues    

Restructuring  the team 



What is the current process? How consistent is the output? Benchmark process with industry and competition. Which steps are most value added - in terms of reducing costs and increasing revenues? How is it quantified and tracked? What is the need for a change? What are the current cost structures and how is it impacted after the restructuring? What is the process of the people working together?

Results sought by management (some with Sustainability aspects)  Streamlining of Order to Cash resulting in reduction in costs and revenue increases.  New IT systems to improve Speed and Quality.



Achieve balance between reduced inefficiencies due to too many people and need for experienced people in the marketplace.

Table 10. Management Focus Area: Finance (Based on: Ohrvall, 2015) Element

Issues

Valuation



Risk Management

 

What is the valuation method, and how does it compare with the industry and competition? What are the assets that contribute to the company’s profit? What are the risks that would erode company value? What are the risk mitigation factors?

28

Results sought by management (some with Sustainability aspects)  Understanding of costs of acquisition with increased assets and the premise for the growth rates and discount rates.  Determination regards IP being unique enough to qualify as a strategic asset.  Key employees to have the acumen to grow the company successfully.  Understanding of risks associated with assets that impact cash flow and the conditions.

Table 11. Management Focus Area: External Forces (Based on: Ohrvall, 2015) Element Competitor Attack

Issues 

 

Market Shift



 

 

What are the changes in competition, its products, and impact on bottom line? What is the impact to revenues and costs? What changes are needed, e.g. match the price, make changes, and seek talent? What are the market shifts in the industry in terms of technology and suppliers? What is the impact on bottom line? What revenue and cost streams are impacted and how can these be protected? What changes in organization are needed to reduce these impacts? What can be gained from the situation?

Results sought by management (some with Sustainability aspects)  Defend the market against increased competitor threats.  Develop a better product line and stop revenue decline.  Keep up with the competition.



Develop an understanding about whether it will be the end or provide the business with new opportunities.

Creating a Case for Digital Transformation Driving Sustainability – Studies and Frameworks The evolution of Digital Transformation started in late 1990’s. Berman (2011) has identified three phases of Digital evolution starting with Digital products and infrastructure in late 1990’s, Digital distribution and web strategy in 2000’s and Digital Transformation of business models in 2010’s (Figure 4). Digital Transformation is expanding its presence and playing a key role in achievement of business results and the success of management models.

29

Figure 4. Evolution of Digital Transformation (Berman, 2011) Since early 2010’s a number of studies have looked at the impact of Digital Transformation on organizations. Some of these are covered in this section for building the case for Digital Transformation. Most of the impacts selected from each study have some Sustainability aspect to it. Deloitte – MIT study (Kane, 2015): The study states that digitally transformed businesses see marked improvements in processes, have an engaged talent at an organization level and adopt new business models: 

Employees are interested in working for digital leaders, seeking the best digital opportunities, thus creating an imperative for businesses to up the digital game for retaining and attracting talent.

30



Digitally maturing organizations are more comfortable taking risks than the less digitally mature peer organizations.



Organizations across the board are using Digital to improve Efficiency and Customer Experience, but higher maturity organizations differentiate by using Digital to transform business and moving ahead of competition, as represented in Figure 5. Such organizations are committed to Transformative strategies supported by collaborative cultures and are open to risk.

Figure 5. Deloitte-MIT study (Kane, 2015)

31

Bain Consulting study (Berez, 2015): The study states that Digital Leaders outperform peers on characteristics that matter most for success. Some of these are “Clear Digital career paths and recruiting strategy”, “separate Legacy and Digital IT organizations”, and “larger allocations of budget to IT”. Refer Figure 6 for the list of characteristics comparing Leaders and Laggards. Cap Gemini and MIT joint study (Westerman, 2011): This is one of the early studies in Digital Transformation. It states that Digital technologies are being adopted by organizations for enhancing Customer Experience and improving Operational processes for some time. Table 12 provides the survey data from the study on the percentage of firms that had been using Digital technologies for achieving results in these two areas. Table 12. Percentage of Firms using Digital Technologies to Enhance Customer Experience and Improve Operational Efficiencies (Westerman, 2011) Digital Technology Analytics Mobile Social Media Embedded Devices

Customer Experience 72% 62% 62% 24%

Operational Process Efficiencies 66% 66% 52% 14%

Cap Gemini Consulting and MIT joint study (Fitzgerald, 2013): This survey conducted in 2013, provides further granularity on the Digital Transformation experiences of organizations: 

78% of respondents felt Digital Transformation will become critical to their organizations in the next two years.



63% stated that the pace of technology change in their organization was slow.



Most frequently cited obstacle was “lack of urgency”. Only 38% of respondents said Digital Transformation was a permanent fixture on their CEO’s agenda. Where CEO’s had shared their vision for Digital Transformation, 93% of employees felt it was the right thing for the organization but a mere 36% of CEO’s had shared such a vision. 32

Figure 6. Digital Leaders Outperform Peers on Characteristics that matter most for success (Berez, 2015)

33

Bain and Company study (Rigby, 2015): This survey is conducted periodically. Trends captured in this study show an increase in use of Digital Transformation: 

The pace of change in businesses has been accelerating leading to faster adoption of Digital Transformation, to tackle the “tectonic shifts in industries, growth opportunities, risks and disjuncture’s”.



Big Data Analytics ranked first in satisfaction in 2014 and 11th in usage, having been introduced to the survey in 2012. Industries adopting this rapidly included Healthcare. Pharmaceuticals, Financial Services and Biotech. On the other hand, smaller companies are especially vulnerable due to unavailability of skilled resources and the capital to build these capabilities. This has been noted by another IBM study (Miele, 2014) - three of five midmarket companies realized the competitive advantage from Information and Analytics, however, most have only capabilities to handle structured data and few have evolved environments that are required for Big Data and Advanced Analytics.



Customer Relationship management is the most popular tool globally with a 46% usage in 2014 as against 43% in 2012.

Pwc 2014 CEO survey (Moritz, 2014): This survey states, 86% of US CEO’s have listed technological advances as the foremost global trend that will transform businesses in the next five years and the top three global technological trends, companies investing in are: 

Business Analytics



Socially enabled Business Processes



Mobile Customer Engagement

Some other findings from this survey are: 34



Companies have to re-think participation with End-Customers, Suppliers and participants.



Companies have to support new technologies and keep the end game on Digital Integration of Social, Mobile, Analytics, and Cloud underpinning the creation of new business models, and use Analytics for answering specific questions.



Improved Customer Experiences in one industry are shaping customer expectations in another industry.



Greater analytical precision is needed for revenue growth, cost management, and creating the expected Customer Experiences.

Harvard Business Review Analytics Services report, sponsored by Microsoft (HBR, 2015): This survey provides insights on the benefits from Digital Transformation to businesses, Table 13. Table 13. Benefits from Digital Transformation (Based on: HBR, 2015) Digital Transformation area Mobile Computing

Benefits

Big Data and Analytics

   

Cloud Computing



Social Computing

  

Increased employee productivity Increased employee collaboration Ubiquitous quality to data and applications access Integration of more forms of data with larger volumes and speed into analysis and decision making Building flexible capacity through ability to scale business up or down in response to demand Increased business agility Improvement in effective Customer Communication and Customer Service Increased employee collaboration

Further pertinent insights from the study are mobile computing initiatives being more frequently adopted than the other three Digital Transformation mega-trends, and while

35

businesses are deriving many benefits from each of these areas, integration of two or more Digital Transformation trends derives the most impact. Accenture study on Industrial Internet of Things (IIoT) (Daugherty, 2015): The study covers the transition to an Outcome Economy. IIoT helps improvements in Productivity, Operating Costs reductions, and Worker Safety enhancements. Per the study, organizations in the future will shift from selling products and services to measurable outcomes aided by IIoT. McKinsey analysis (Olanrewaju, 2013): Per the study, Digital Transformation affects following areas of a modern enterprise: 

Decision making based on Big Data and Advanced Analytics



Connectivity with the Supply Chain, Customers and internal stakeholders



Innovation of products, business and operating models



Automation with a larger role played by technology The above in turn impact Customer Experience, Product and Service Innovation,

Distribution, Marketing and Sales, Digital fulfillment, Risk Optimization and Enhanced Corporate control. Table 14 provides further details of these impacts. Table 14. Digital Re-shapes every aspect of Modern Enterprise (Based on: Olanrewaju, 2013) Business Aspect Customer Experience Product and Service Innovation Distribution, Marketing and Sales Digital fulfillment

       

Digital Transformation Impact Seamless multi-channel experience Whenever, Wherever service propositions New Digital Products and Services Co-creation of new products Digital marketing with higher Return on Investment Digital Augmentation of traditional channels Full straight through Processing and Automatic Provisioning Virtual Servicing and Administration 36

Business Aspect Risk Optimization Enhanced Corporate Control

   

Digital Transformation Impact Improved targeting with Customer Insights Embedded/ Automated controls and Risk profiling Improved real-time Management Information Systems and Decision making Seamless integration into third parties

Digital Reinvention framework (Berman, 2013): IBM has defined a digital re-invention framework that focuses on re-inventing Customer relationships, and changing the current business model, by adopting Digital Transformation technologies. The framework moves an organization from being self-centered to an individual centered leveraging Analytics, Cloud Computing and Big Data and from “individual centered” to “everyone to everyone” economy, characterized with hyper connectedness and collaboration of consumers and organizations across functions and value chain including Design, Production, Marketing, Distribution, and Funding. This Digitization Maturity Model is shown in Table 15 and pictorially in Figure 7. Table 15. Digitization Maturity Model (Based on: Berman, 2013) Feature Connectivity

Organization centered Asymmetric – restricts coordination

Interactivity

Incidental – one time transaction availability

Awareness

Segmented – individual is unknown and assumed Transactional – Passive learning

Intelligence

Individual centered

Everyone to everyone

Flexible – Supply Chain is transparent and automated Integrated – Individual/ Organization and Digital/ Physical linked Tailored – Individual is known and unique

Orchestrated – Collaborative and Seamless ecosystem Symbiotic – Everything and Everyone is mutually interdependent

Responsive – Data supported learning and decision-making 37

Contextual – Experience calibrated and relevant to actions and needs Cognitive – self supported learning and predictive capabilities

Figure 7. Digital Reinvention Framework (Berman, 2013, Original source: 2011 IBM Digital Transformation Study and 2013 IBM Institute for Business Value Analysis) The above studies have shown that aspects of Digital Transformation consisting of Mobile Computing, Social Computing, Big Data and Analytics and Cloud Computing are having or beginning to have significant impact on Customer Service, Operational efficiencies and Business Models adopted by organizations. The rate at which the impact is felt will depend on the industry, geo and few other factors. The next couple of studies focus on the pace of change in organizations. Pace of transition: There are two studies presented here on the Digital transition across industries. The Bain study has a global context while the Deloitte study is based on corporate data from Australia. Though the latter is based on data from a single country, the findings from the two studies are revealing: 

Every industry will undergo some degree of Digital Transformation.

38



Every company will have to respond



The situation creates a threat for industries but also an opportunity for companies that can successfully and quickly merge both the Digital and Physical worlds

DigicalSM Transformation: Bain and Company (Rigby, 2014) have coined a term “DigicalSM Transformation”, DigicalSM referring to the marriage of the Digital world with the physical world and both co-existing and indispensable to each other. Figure 8 presents a projected DigicalSM transformation scenario by industry through 2020. DigicalSM Transformation is not going to be equal for each industry but eventually all industries will catch up. There are some industries such as Healthcare, and Pharmaceuticals where potential changes are impacted by regulatory and legal requirements and therefore may show quicker transformation. Fuse – Bang map: In 2012, Deloitte, Australia presented a Digital Disruption Map (Deloitte, 2012) placing various Australian industries on, what it referred to as, a Fuse-Bang map. The framework considers both the scale of the residual impact of Digital, referred to as ‘Bang’ and how soon an industry will be affected, referred to by the length of the ‘Fuse’. The four quadrants are as shown in Figure 9.

39

Figure 8. Projected DigicalSM Transformation by Industry through 2020 (Rigby, 2014)

40

Figure 9. Digital Disruption Map (Deloitte, 2012) 41

This was followed by another study by Deloitte in 2014 (Deloitte, 2014), to see the Digital impacts after two years, using the Fuse – Bang framework in various industries. The results from the changes over two years in ICT and Media industry from the Short Fuse and Big Bang quadrant are revealing. This is presented in Table 16, and shows a significant impact in terms of revenue growth in this industry for Digital players. Table 16. Selected Firm Performances in the IMT Industry (Based on: Deloitte, 2014)

Established players

Primarily Digital players

Fairfax Media Limited News Australia Holdings Pty Limited Thomson Reuters Ten Network Holdings Limited Google Australia Pty Ltd. Carsales.com Limited REA Group Ltd

Change in revenue over 2 years -18% -9% -2% -23% 77% 41% 41%

The study provides further information of the transition taking place across industries in the remaining three quadrants, as seen in Table 17, though at a different pace and includes impact of factors other than Digital Transformation. Table 17. Data from remaining 3 Quadrants of Fuse-Bang Framework (Based on: Deloitte, 2014) Industry

Quadrant

Accommodation and Food Services

Short Fuse Short Bang

Utilities

Big Bang, Long Fuse

42

Digital Impact on revenues over 2 years Small increase in the spread of revenues in the industry indicating some spread but not significant An increasing spread of revenues, however linked to Consolidation, Regulation and Consumer patterns rather than to Digital disruptions

Industry Manufacturing

Quadrant Long fuse, small bang

Digital Impact on revenues over 2 years Revenue dispersion in the industry has declined suggesting common forces rather than Digital Transformation

Creating a Case for Digital Transformation Driving Sustainability – Case Studies The previous section presented findings from various studies and the frameworks proposed. These are part of the data for building a Business Case for Digital Transformation driving Sustainability. In this section, various Case Studies are being presented to further consolidate the Business Case. In several of these Case Studies, the link between Digital Transformation and Sustainability is being shown or is stated. In Table 18, some of these impact areas are classified in terms of Sustainability impacts and other impacts. This list has been derived from the various Digital Impact Case Studies, some of which are covered later in this section. A more comprehensive list of Case Studies are presented in Table 19. Table 18. Digital Transformation Impacts – Derived from Case Studies

Economic Cross functional synergies

Sustainability impacts Environmental Social Document Global workforce Management Management

Risk scoring and fraud detection

Cross Functional synergies

Brand Recognition

Increased speed to market

Multi-channel marketing

Multi-channel marketing

43

Other impacts Web content optimization and Enhancement of KPI’s with digital dashboards Data consolidation and content management Salesforce effectiveness

Economic Significant customer insights, better customer segmentation and conversion rates Reduction in operational costs Brand Recognition

Sustainability impacts Environmental Social Cross channel Significant customer integration insights

Localization

Localization

Channel conflicts reduction

Enhanced Customer Experience

Other impacts Influencing spending behaviors of employees

Financial consolidation Informed planning and high performance security capability

“Beyond Supply Chains Empowering Responsible Value Chains” (WEF, 2015): This case study presents the role of Digital Transformation in Supply Chain of large corporations and has demonstrated both the positive and negative impacts on Environment and local Economies. For the impact to be positive, leading companies are looking to adopt what is referred to as “Triple Supply Chain advantage” that have the potential for increasing Revenues by 5-20%, reduce Supply Chain costs by 9-16%, Brand value increase by 15-30%, reduce company risk, improve customer health, local welfare and labor standards, and reduce Carbon gas by 13-22% of the overall footprint. To achieve this Triple Supply Chain advantage companies leverage Digital technologies for increased Visibility and Traceability. Some technology examples are use of Telematics where sensors capture truck driver’s driving performance and upload the data to a data center, leading to interventions resulting in reduced carbon emissions and better maintenance. Another example is use of scalable solutions that provide visibility of Supplier Information Management, Data Management and Analytics leading to better compliance and lowering of defaults.

44

Table 19. Digital Transformation Case Studies (sources: Accenture, Pwc, Cap Gemini, Deloitte, KPMG sites, 2015)

Sr. No.

1

2

Case Study objectives

Achievement of Big Data goals

Vertical Group

Banking

Analyticspowered platform for bank managers to improve client interactions Banking

Country

Spain

France

Digital Transformation area

Big Data

Functional Area

Repository

Customer Service

Analytics

Digital Transformation Impact

Consolidation of data, resulting in better products Improvement in employee efficiencies Enablement of centralizing of regulatory information

3

Healthcare

USA

Population Health

Analytics 45

E

En

X

X

S

Improvements in care of at-risk patients

Other impacts

X

X

X

X

Automation of routine processes Productivity improvement of account managers

Health Analytics to improve care

Likely Sustainability Impact (E-Economic, EnEnvironmental, S-Social)

X

X

X

Sr. No.


Vertical Group

Country


Functional Area


Likely Sustainability Impact (E-Economic, EnEnvironmental, S-Social) E

En

S

Other impacts

for at-risk populations Improvement in cost management of not-for profit funds

4

Analytics for transforming internal auditing

ICT

USA

Analytics

Internal Audit

Process efficiency improvements Enhancements to business operations and controls

X

X

X

X

X

Saving time for audit analysis

5 6

Cloud Communicati ons Migration Publishing over web

ICT

Worldwide

ICT

Worldwide

Cloud Computing Cloud Computing

email and Shared Services Web Publishing

46

Cost Management of infrastructure Operational cost management Reductions in maintenance

X

X X X

X

X

X

Sr. No.


Vertical Group

Country


Functional Area


Improvement in operational efficiencies

7

8

9

10

Workforce Planning for strategic growth Telecast of video over cloud Boosting Energy Efficiency of buildings Recruitment Process simplification

Insurance

Africa

Analytics

Work Force Management

NGO

USA

Cloud Computing

Infrastructure

Efficiency Improvement in work force Cost Management, Scalability and faster response times

Government

USA

Analytics

Power Consumption

Reductions in energy use

Manufacturing

South Africa

Cloud Computing

Recruitment

47

Simplification of recruitment process Efficiency Improvements in recruitment process


En

S

X

X

X

X

X

X

X

X

X

X

Other impacts

Sr. No.


Vertical Group

Country


Functional Area



11

Customer relationship management offered as Software as a Service

NGO

USA

Cloud Computing

Customer Service

Employee efficiency improvement Infrastructure cost management

12

13

An integrated customer information management

Improved in sales forecasting and demand planning

Healthcare

Consumer Products

UK

NA

CRM and Analytics

Customer Service

Sales Forecasting & Demand Planning

Analytics

48

En

Operational efficiency improvement Efficiency improvement in building business capabilities

Improvement in operational efficiencies Cost management and inventory control

S

Other impacts

X X

X

X

X

X X

X

X

Sr. No.

14


Improvement in digital roadmap

Vertical Group

Telecom

Country

UK

15

Implementatio n of mobile technology Government

Canada

16

Building an ecommerce Superstore

Retail

Government

17

18

Creating an Analytics vision Achieving Efficiency and Cost Savings

Government


Functional Area

Content delivery

Mobility


Improvement in operational efficiencies multi-channel integration

Mobility

Asset Management

Improvement in operational efficiencies

USA

e-commerce

Customer Service

USA

Analytics

Service Delivery

multi-channel integration Improvement in efficiencies and Government productivity

USA

Service Delivery

Analytics

49

Improvement in efficient use of resources Improvement in efficiency in decision making


En

X

X

X

X

X

X

X

X

X

X

X

S

X

X

X

X

X

Other impacts

Sr. No.


Vertical Group

Country


Functional Area


Reduction of risks in carrying out activities

19

20

21

Analytics and Workforce optimization

ICT

Customer relationship management implementatio n Retail Align Assortment planning with consumer Consumer preferences Products

USA

Analytics

Workforce

Optimization of workforce Productivity improvement of workforce Improvement in labor cost management


En

X

X

X

X

X

X

X

Italy

Integration of POS and CRM systems

Store Operations

Improvement in store operational efficiencies

X

X

North America

Analytics

Assortment Planning

Reduction in portfolio size

X

X

50

S

X

Other impacts

Sr. No.


Vertical Group

Country


Functional Area


Improvements in inventory control

22

23

Deploying hosting solutions for the Media Industry

Building a solution for storage binbased warehouse management system

Media

Transportation

USA

Spain

Hosting program services

Cloud Computing

Inventory Management

Mobility

51

Operational cost management Operational flexibility in programing Cost management of infrastructure

Reductions in time to order Optimization of inventory control Reductions in repair cycle time


En

X

X

S

X X

X

X

X

X

X

X

X

X

X

Other impacts

Sr. No.


Vertical Group

Country


Functional Area



Improvements in public transport (bus) services

24

25

26

Use insights from analytics for upgrading distribution network

Food Service

Assessment of new credit risks using cloud-based analytics solution Banking Optimization of supply chains Energy

USA

Analytics

Supply Chain

Better cost management through improved distribution Improvement in efficiencies leading to better transportation

France

Cloud Computing and Analytics

Risk Management

Automation of risk assessment

USA

Analytics

Geospatial Supply Chain

Reductions in forecasting errors Improvement in efficiencies for

52

En

S

X

X

X

X

X

X

X

X

X

X

X

Other impacts

X

X

Sr. No.


Vertical Group

Country


Functional Area


replenishment scheduling Improvements in inventory control 27

28

29

Analytics Initiative

Creation of an enterprise mobile app

Analytics for planning

Logistics

Drilling

Consumer Products

Global Company

Global Company

Global Company

Analytics

Operations

Mobility

Operations

Merchandise Planning

Analytics

53

Process improvements Risk reduction by ensuring that SLA's are being met Improvement in efficiencies by taking corrective actions


En

X

X

X

X

X

X

X

X

Empowerment of workers Improvements in communication and training Improvements in assortment planning

S

X

X

X

X

X

X

Other impacts

Sr. No.


Vertical Group

Country


Functional Area

Supply Chain

30

31

Implementatio n of a Human Resources solution Hospitality

Optimization of product portfolio and realization of significant profit improvement

Consumer Products

Global Company

USA

Human Resources and HCM

Cloud Computing

Retail Chain Optimization

Analytics

54


Improvements in a seamless delivery process Improvements in inventory control

Improvements in talent management Streamlining of business processes

Optimization and rationalization at SKU level Improvements in portfolio through reductions


En

X

X

X

X

S

X X

X

X

X

X

X

X

Other impacts

Sr. No.

32

33

34


Transformatio n of digital channels

Mobile workforce management

Using Analytics for fighting gang crimes

Vertical Group

Insurance

Utility

Government

Country

Japan

Italy

UK


Mobility

Functional Area

Sales

Workforce management

Mobility

Crime Prevention

Analytics 55



En

Improvement in efficiencies through reduction in paperwork

X

X

Cost management through digitization

X

Improvements in service coordination Cost Management through reductions in overtime Improvement in efficiencies by making redundant the commute between home and office and instead direct to site

Improvement in public safety

S

X

X

X

X

X

X

X

Other impacts

Sr. No.

35

36

37


Sales Force Automation and retail execution Improving Forecasting and Replenishmen t Planning through Analytics

Impact state revenues through Analytics

Vertical Group

Manufacturing

Retail

Government

Country

Netherlands

USA

USA


Functional Area

CRM

Sales

Analytics

Forecasting and Replenishment Planning

Analytics

State revenues

56


Seamless collaboration between channels leading to less waste of time and effort

Improvements in the forecasting process across business areas Improvements in seasonal sales management

Fraud detection leading to additional revenues Improved regulations Compliance based on security policies and guidelines


En

S

X

X

X

X

X

X

X

X

X

X

Other impacts

Sr. No.


Vertical Group

Country


Functional Area



Prevention of unsupported refund claims

38

39

40

Making risk management sustainable

Development of a cloudbased Portal for a learning based system Salesforce Cloud Solution used for boosting productivity and improving

Analytics, Data Management, Reporting

NGO

Global NGO

Cloud Computing

Learning Based system

Improved risk management Operational integration of risk management with day-to-day operations Enabling sharing of learning based content through cloud based solutions for business problems between multiple NGO organizations

Retail

North America

Cloud Computing (Salesforce)

Productivity and Customer Experience

Improvements through simplification and standardization

Retail

USA

Risk Management

57

En

S

X

X

X

X

X

X

X

X

Other impacts

Sr. No.


Vertical Group

Country


Functional Area



En

X

X

S

Other impacts

X

X

customer experience

41

42

43

Cloud service solution Increased efficiencies for issuing notices and for fine collection

Faster Delivery of

Media

Government

Government

Belfast

Portugal

Brazil

Cloud Computing

Operations

Mobility

Operations

Analytics

Social services 58

Improvement in efficiencies and reductions in computing resource costs

Standardization of procedures between security forces Streamlining of information flow Reductions in number of road accidents Optimization of processes, technologies across the organization

X

X

X

X

X

X

Sr. No.


Vertical Group

Country


Functional Area



En

S

X

X

X

Other impacts

Municipal Services

44

Data Driven Risk Analysis

Financial Institution

NA

Risk Management

Analytics

Improvement in efficiencies through resolution between resources Improvements in meeting consent order requirements in risk and money laundering Improvement in operational efficiencies

46

47

Digital Transformatio n in an international banking group Banking Capitalizing on Digital Opportunities Media

France

Web, Mobile, Social, CRM, and Analytics integration + cloud

Operations

France

Mobility

Print media

59

Rationalization of processes leading to international economies of scale Transformation from paper to digitization of content

X

X

X

X

X

X

X

X

Sr. No.


Vertical Group

Country


Functional Area



48

49

50

51

Energizing organization through Gamification

Improvement in Road Safety for young pedestrians Manage Spike in Seasonal Volumes Manage Mobility for meter reading

Energy

UK

Mobile Computing Gamification

Energy Use

Government

Norway

Mobile Computing

Safety

Logistics

Nordic

Mobile Computing

Operations

Power

Netherlands

Mobile Computing

Operations

60

Improvement in efficiencies in employee back office processing Driving in green behavior Excellence in process Savings through adoption of Lean

Enablement of crowd sourcing of information for safety of children Improvement in efficiencies in operations saving time Improvement in efficiencies for data collection

En

X

S

X

X

X X

X

X

X

X

X

X

X

Other impacts

Sr. No.


Vertical Group

Country


Functional Area



52

53

54

Operational improvements by shaping and continuously personalizing digital offerings Enabling an online bank Enabling an online retail mall with searchable features on product SKU's that run into thousands

Government

Banking

Retail

Australia

Australia

Australia

Mobility

Superannuation

Improvements in operational efficiencies leading to increased transaction volumes

Mobility

Customer Services

Improvement in efficiencies in customer service

X

Mobility

Customer Services

multi-channel integration

X

61

X

En

S

X

X

X

Other impacts

Sr. No.


Vertical Group

Country


Functional Area



55

Improving operational risk management

ICT

USA

Cloud

Taxation

56

Improvement in information management

Banking

Africa

Cloud

Taxation

57

Enabling a single global work-force

Consumer Products

Global

Cloud

Documentation

62

Improvements in efficiencies and standardization of taxation processes Improvement in efficiencies of taxation processes and easier deployment of taxation solutions Sharing and collaboration between internal and external teams through a global document management system on cloud

En

X

S

Other impacts

X

X

X

X

X

X

X

“Inside P&G’s digital revolution” (Chui, 2011): The case study covers a large scale project undertaken by Procter & Gamble (P&G) for application of Digital technology and advanced analytics across every aspect of P&G’ operations and activities that included R&D Labs work, relationships with Retailers, Manufacturing, Brand building and Customer interaction. The impacts of the project led to better Innovation, higher Productivity, lowering of Costs and faster Growth. In Transport and Logistics, P&G created a digitally enhanced operational program that reduced deadhead movement by 15%, thus reducing costs and carbon monoxide emissions. In manufacturing, employees were allowed to use smart devices, such as iPads, to download data off the production line in real time, resulting in operational efficiencies. Commerce with retail partners was done in a totally automated way with no human intervention using a common data warehouse called GDSN, eliminating errors in order communication with Retailers and Suppliers, thus reducing losses and waste. Modeling and Simulation was adopted, and Product Design and Modeling was made virtual, all resulting in significant time and cost savings. Digital Transformation in the automotive industry: Digital Transformation plays a key role towards driving Operational efficiency, Business flexibility and higher returns in the automotive industry. The industry is faced with challenges such as vehicle recalls, Warranty commitments and Traceability data. The US statistics for recall are staggering. In 2013, 22 million vehicles were recalled (Gupta, 2014) and 2014 was a record year with over 50 million vehicles recalled (Basso, 2014). More than 1 trillion pieces of traceability are generated each year for regulatory, warranty and recall control (Gupta, 2014). Digital solutions are addressing areas such as Supply Chain tracking, flexible manufacturing, and higher quality resulting in better data integration, process optimization, and meeting regulatory requirements.

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Digital Transformation in the Healthcare industry: An interview with Dr. John Halamka, CIO of Beth Israel Deaconess Medical Center, Boston, MA (Kane-Halamka, 2015). Digital strategy was key to the hospital meeting its regulatory requirements and the stringent performance criteria set. The Digital Transformation strategy was based on: 

Moving and operating the software for Electronic Health Records (EHR’s) to a single instance cloud-hosted web enabled application.



Moving the hospital Ambulatory system to a cloud based subscription model that runs anything, anywhere and is agile.



Revamping of the Care-management medical record system, reducing and preventing redundancy, waste, focus on keeping a person well at home, and reducing emergency visits.



Engaged patient care systems on Mobile technologies that ensure seamless dual data transfer between patient and hospital.



Leveraging state’s Health Care Information Exchange to achieve various interoperability requirements. The result has been a complete transition out of handwritten paper based orders,

substantially reducing errors and resulting patient harm, and the Digital workflow has led to significant patient satisfaction and retention. There is a significant reduction in risk because of the Digital enablement through the use of vast quantities of data and supporting analytics. An extended solution for this industry, from the study, is Data Sharing through a common platform such as Health Care Information Exchange, which will ensure that data is available with all caregivers resulting in making “care” patient centric, bringing sustainable benefits such as reduced commute for the patient and ensuring care is closer to home. 64

Report on The Shifting US Healthcare landscape by Bain and Company (Biesen, 2015): The report provides a perspective similar to the one provided by Dr. Halamka. Figure 10 provides a view of the investment in new tools for a more systemized care. The clinical tools being adapted reflect the Digital adoption and impact in Healthcare such as Tele-medicine, Remote Patient Monitoring, Predictive Analytics, comparative effectiveness Data, Physician extenders, Electronic access to Treatment Protocols, and Electronic Medical Records (EMR’s). Digital Transformation in Personal Banking: Start-ups are changing the rules of Personal Banking and a bank’s traditional role (Vater, 2015). This change is shown in Figure 11. The Digital Disruption here is in form of start-ups that are providing Aggregator solutions such as Comparison sites, and Personal Financial Management solutions; Innovation based solutions such as Social Investing apps, Payment players, and Lending platforms; Disruption based solutions such as peer-to-peer platforms and “Easy banking”. These providers are leveraging Digital technologies - Cloud, Mobile and Social Computing with Big Data Analytics. This new industry dynamic is causing traditional large banks to re-think current business models.

65

Figure 10. Providers investing in New Tools for supporting Systemized Care (Biesen, 2015)

66

Figure 11. Start-Ups changing the Rules of the Game (Vater, 2015) 67

Digital Transformation in Global Insurance industry: Below is data from a study by Bain and Company (Mueller, 2015) on the state of Digital Transformation in the global Insurance industry: 

79% of consumers worldwide showed willingness to use Digital channels for transactions



Almost half of Insurance companies indicated a lack of realistic plan for a Digital Transition



Trend of new premiums over Digital media to go up from 8% to 15% in Life insurance (Life) and 10% to 23% in Property and Casualty insurance (P&C) over next 3-5 years



Expected trends: o Customer’s use of Digital for after-purchase inquiries and servicing to go up 37% o Reduction of use of contact centers by 26% o Increase in Auto-Underwriting and Auto-Adjudication by 20%

Big Data and Analytics spend growth on an annualized basis to go up by 24% in Life and 27% in P&C. 

Digital transformations to impact following areas: o Enhanced Customer Experiences o Omni-channel Sales and Distribution o Optimized Operations o Innovation ready organizations

Sustainable replacements enabled by Digital Transformation: Table 20 provides a list of broadband activities that are sustainable replacements for specific consumer services (Laitner, 2012, © Copyright 1997-2012, Yankee Group Research, Inc., and the American Council for an Energy-Efficient Economy (ACEEE)). Each of these are enabled by Digital Transformation

68

areas of Cloud computing and Mobile Computing. Based on Monte Carlo simulations, the study determined annual energy savings as shown in Table 21. Table 20. Sustainable Replacements enabled by Digital Transformation (Based on: Laitner, 2012, © Copyright 1997-2012, Yankee Group Research, Inc., and ACEEE) Broadband- enabled / enhanced activity Telecommuting Using the internet as a primary news source Online banking E-Education E-commerce Downloading / streaming media (music and video) Digital photography E-mail

Replacement for… Commuting / from an office Purchasing a printed newspaper/ magazine Travelling to / from a bank branch Travelling to the Education center Purchasing retail products in a store Purchasing physical media for music, video and books Purchasing / processing physical prints Sending personal correspondence via postal service

Table 21. Annual Energy Savings in million barrels of Oil equivalent (Based on: Laitner, 2012, © Copyright 1997-2012, Yankee Group Research, Inc., and ACEEE) Savings Online Streaming Online Tele Online Online Digital E- Total in news music banking commuting shopping Education photos mail million barrels of oil EU-5 0.2 2.1 5.1 102 5.2 1.1 5.2 1.8 122.9 region average US 0.2 1.8 7.8 214.6 8.6 2 11.3 3.4 249.7 Latiner (2012) has stated that ICT-enabled services can deliver significant net energy savings across a variety of activities and consumer end uses, as shown in Table 22. However, Latiner also mentions that, though there are millions of people in European Union Five (EU-5) and the U.S., individual separate actions and behaviors may not add up to large savings 69

collectively. Rather for larger net savings would require systems and or infrastructure improvements to be done at “Scale”. “Scale” refers to tackling entire motor systems or large scale improvements such as whole building improvements that are enabled by a range of ICT services. Additional Digital Transformation examples: Below are additional examples of Digital Transformation with Sustainability benefits: 

“Our modelling shows if 80% of enterprises across the countries under examination adopted Cloud-based email, CRM and groupware applications they would abate GHG emissions totaling 4.5Mt of CO2e” (Dickerson, 2010).



The following examples from Thormond (2013) showcase Sustainability impacts from Digital Transformation and application of Information and Communication Technology (ICT) in general: a. Developing an early warning system for monitoring climate conditions in Ecuador – use of Mobile technology for messaging about projected severe weather conditions to communities. b. Mobile Communications to revolutionize African weather monitoring – deploying cellular sites across Africa resulting in accuracy of forecasts and provision of weather information via mobile devices for remote communities. c. Tele-medicine in flood affected areas of Pakistan – deployment of 100 broadband satellite terminals in the flood affected districts of the country, providing access to Telemedicine applications/ services in remote areas.



The following are examples from an interview with Olivier Binse of Deloitte (Sommer, 2013): 70

a. Khan Academy has been providing free education for Anyone Anywhere, offering education material over the web leveraging Cloud platform capabilities and using mobile apps with crowd-sourcing of content, a case for a sustainable way of imparting education by leveraging Digital Transformation. b. Green Dot launch of GoBank that enabled banking over mobile, a new way for consumers to interact with their bank and that has led to the transformation of the Retail Banking industry, a case for a sustainable way of banking leveraging Digital Transformation. 

Table 22 provides high level information on cases of ICT solutions (some of which are in pilot stage) for sustainable lifestyles created by Global e-Sustainability Initiative (GeSI) and Collaborating Centre on Sustainable Consumption and Production (CSCP) – GeSI (2012). The data is for both Business to Business (B2B) and Business to Consumer (B2C) scenarios and covers impact in Communication, Health, Education, Mobility, Food and Drink, Housing, and Employment industries. The case studies are from across the globe.

71

Table 22. ICT solutions based Sustainability Impacts (GeSI, 2012) Companies providing ICT solutions  Alcatel Lucent  Deutsche Telekom AG  Ericsson  Hewlett Packard  KPN  Microsoft  Nokia  Vodafone

Areas of impact       

Countries  

Communication (B2B, B2C) Health (B2B, B2C) Education (B2B, B2C) Mobility (B2B) Food and Drink (B2C) Housing Employment (B2C)

   

Bangladesh New Zealand Germany Sweden Scandinavia Brazil

    

Africa Latin America USA Netherlands UK Turkey

Sustainable Impacts of deployed Digital solutions on Lifestyles 







 



 

School student access to internet resources for education through implementation of Mobile Broadband and Cloud solutions Optimization for local fishermen on optimal fuel use based on weather conditions Changes in patient’s plan of care based on dashboards and increased compliance through access to real time patient safety dashboard Reduction in dependency to be mobile for work by enabling independence to work from location and time Improved building energy efficiency Efficiency improvements in municipal operations reducing costs and CO2 emissions Improved farming practices and more security



 





72

Meeting capacity demands in rural settings Provision of Mobile applications through Broadband everywhere Improvements in life of quality of patients through use of remote mobile devices and avoidance of commute for patients Provision of environmental, and health information on food New traveler services allowing commuters plan routes and flexibility in ticket purchasing leading to safer travel Reduction in energy use and carbon emissions from IT through dynamic provisioning, multi-tenancy, better utilization of servers, and improved Data Center efficiencies Ease and safe use of Public Transportation

Survey Results A survey was conducted, as part of this capstone, in the form of emails sent to Division, Functional and Sustainability heads of about 150 Fortune companies. The companies selected for the study were US headquartered and some of the industries covered were: 

Manufacturing



Agriculture and Mining



Computers and Electronics



Healthcare



Pharmaceutical



Biotech



Retail



Banking



Media There were 29 responses received. However the last response received from a Media

company was late and hence its data has not been considered in the analysis. There was just one response from this industry and therefore it is felt that this non-inclusion should not materially impact the Findings, Analysis, and Conclusion of the capstone. Many of the email responses received indicate that several of the respondents directed the questionnaire to the Sustainability group of their organization, for a response. This is also borne out by the larger proportion of survey participants that are either from Sustainability group or Environmental, Health and Safety groups – 13 of the 28 responses received. It is therefore felt that the responses have been, by and large, from separate organizations with few multiple

73

responses from a single organization. If this is correct, then response rate should be between 17% and 19%. In the data presented, in the rest of this section, percentages are based on the response number of 28. There were 4 declines for response at the company level, which is about 3% of the total. The remaining section provides data from the survey responses. The questionnaire copy is in Appendix I. Figure 12 shows the breakdown of responses received in terms of industries. Responses from the Manufacturing industry has been the highest. There is an almost equal representation of responses from other industries including Agriculture and Mining, Computers and Electronics, Healthcare, Pharmaceutical, Biotech and Retail. There was no response from Banking industry and one response from Media industry.

Figure 12. Industry-wise breakdown of responses

74

Figure 13 provides breakdown in terms of the size of an organization. There is a bell shape in the number of responses received with the largest number coming from companies with annual revenues between $5 billion to $10 billion and $10 billion to $25 billion.

Figure 13. Distribution of responses in terms of Revenues Of the 28 responses to the question “Has a Digital Transformation Initiative been taken up or is under consideration in your functional area?” 21 responses are in the affirmative. Of the 7 that are either negative or did not respond, 2 are Healthcare companies of which one stated “Cloud Computing” to be the area of Digital Transformation even though the answer was negative to the former question. A possible explanation for this response is, since the respondents from these companies are from Sustainability and EHS departments, there is no Digital Transformation within their own groups but could be happening within the organization. A similar feedback from the Operation groups of a Biotech company and of a Food services company were received and should have similar explanations. 2 of the other 3 are from Operations group and Procurement group of a Manufacturing company / companies.

75

Of the various Digital transformation areas the responses indicate Mobility to be leading (this is along the lines of findings from an earlier mentioned survey - Harvard Business Review Analytics Services report, sponsored by Microsoft (HBR, 2015)), followed by Analytics, CRM, Cloud Computing, Social computing and Big Data in decreasing order, Figure 14.

Figure 14. Response to use of Digital Transformation The breakdown of responses to the question “What business requirements are the Digital Transformation solutions addressing?”, are in the order of decreasing number of responses, Order Reporting, e-Commerce, Customer and Marketing Analytics, Enterprise Collaboration, Risk and Operational Analytics, Work Force and Field Force Automation, Sustainability requirements, and Industry specific. The Sustainability specific responses for “Others” are: 

Environmental footprint data



Dow Jones Sustainability Index



EPA Smart way



Sustainability Reporting

76

The “Other” responses received on business requirements being addressed by Digital Transformation are: 

Use in Strategy



Factory Collaboration



Energy related Digital monitoring and



Raw Material Management

Analysis



CMMS software

Industry related: Monitoring patient outcomes



Laboratory Analytics

thru wearable technology and Digital apps



Manufacturing / Oil / Gas / P&P / Mining





Marketing, Advertising

/ Materials handling

The responses for “What are the business benefits from the Digital Transformation Efforts?” are in order of decreasing number of responses, Improving Operational Efficiencies, Improving Customer Experience, Building Competitive advantage, Cost savings, Risk Management, Contribute to Sustainability efforts of the organization, Brand Differentiation, Faster Time to market, and Others, as shown in Figure 15. “Others” had an additional Retail industry specific response “support for unique soft goods retail requirements”.

77

Figure 15. Response to Business Benefits from Digital Transformation efforts The responses to the question “Which functional areas are being addressed by the Digital Transformation projects?” are in decreasing order of number of responses, Reporting and Analytics, Customer Relationship Management related, Manufacturing solutions, Order Management, Supplier Management, Human Resources related, Financial Management, and Others. This data is shown in Figure 16.

Figure 16. Response to Functional areas addressed by Digital Transformation projects 78

Of the 28 responses, 25 confirmed having an organizational CSR program. To the question “How is your functional group engaged with the corporate CSR program and strategy?” the responses in decreasing order are Providing data, Attend periodic CSR meetings, Environmental Life Cycle Analysis, Function has its own defined Sustainability approach distinct from the corporate CSR, Other, Business Agility, Scalability, and Not Engaged. One of the “No” responses on corporate CSR had the following feedback on functional group engagement with corporate CSR program: “This is not a program but a cultural transformation that engages all Operational, Supply, and Manufacturing, and Leadership areas of the organization”. This was from a Healthcare company and indicates that the company looks at the CSR program not as a separate function or group, rather integrated into the various functional areas of the organization. The data is presented in Figure 17.

Figure 17. Response to Functional Group engagement with corporate CSR Program and Strategy

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The next set of responses were on corporate CSR reporting and standards adopted. In decreasing order, the CSR reporting adopted by the responding organizations were Carbon Disclosure Project, Global Reporting Initiative, UN Global Compact, part of Triple Bottom Line reporting and “Other”. “Other” reporting included Dow Jones Sustainability Index, EPA Smartway program, and non-specific reporting and compliance. 4 companies did not provide any response. This data is shown in Figure 18.

Figure 18. Response to CSR Reporting To response on the question “What are some of the CSR standards adopted by your organization?” the responses in decreasing order are ISO 14001, OHSAS 18001, Other, ISO 50001, ISO 26000, and ISO 31000. Among other standards followed are ISO 12100, internally created EHSMS similar to ISO 14001 and ISO 18001, ISO 9001. 7 companies did not provide any response. The data is shown in Figure 19.

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Figure 19. Response to CSR Standards To the question “What are some of the drivers for adopting CSR within your organization”, the responses are mostly evenly distributed between the various drivers as shown in Figure 20.

Transperancy

32%

Reduced Scrutiny

21%

Risk Management

43%

Mandatory Requirements such as EPA

39%

Health and Safety

36%

Brand Differentiation

50%

Cost Savings

36%

Building Competitive Advantage

39%

Improving Operational Eficiencies

50%

Improving Customer Experience

43%

Figure 20. Response to CSR Adoption Drivers

81

Additionally, some other CSR adoption drivers stated in the responses are: 

Responding to customer and market demand



Efficient operations



Saving and making money



Differentiation of corporate image and products



Reputation Risk Management To the question on Sustainability related projects being undertaken by the functional

group, as shown in Figure 21, in order of decreasing numbers, the projects are Local Community projects, Renewable Energy projects, Volunteer hours, Education projects, Workforce inclusion and Diversity, EPA mandated Environmental projects, Healthcare projects, industry specific and other projects. In “Other” category the responses included following projects: 

Strategic projects



Biomass utilization projects



Coalition initiatives



Bottle re-cycling projects



Waste Management initiatives



Environmental impact projects that relate to the principles of Reduce, Recycle, Reuse

82

Figure 21. Response to Sustainability projects by Functional Groups To the question on relation between group’s Digital Transformation efforts and Corporate Sustainability at group / organization level, the response, as seen in Figure 22, in decreasing order are Sustainability and Analytics, Sustainability and Customer Relationship Management, Sustainability and Mobility, Sustainability and Cloud Computing, Sustainability and Social Computing, Sustainability and Big Data, and Other. This question did not receive 7 responses.

Figure 22. Response to Relationship between Digital Transformation and Corporate Sustainability Additional comments from the survey responses are in Table 23. 83

Table 23. Additional Respondent Comments Sr. No. 1 2

3 4

5

6

Organization type $5-$10 billion revenue range, Healthcare company >$25 billion revenue pharmaceutical company

Comment “We are a new organization, and just developing CSR initiatives and overall Sustainability. Working to see to higher levels. Good hopes for the future.” “For us as a healthcare organization, our digital transformations are focused on making healthcare more effective and more efficient and through those efforts, if we can make healthcare more sustainable, we make society more sustainable. For traditional environmental Sustainability, our digital efforts have been focused on automating and analyzing data (e.g., energy, water, materials use, etc.) and optimizing reporting to help facilitate greater transparency.”

$10-$25 billion revenue range retail company $500 million - $1 billion revenue range manufacturing company >25 billion revenue Computers and Electronics company

“In Retail Soft-goods, for us, these are pretty distant from each other at this time.”

>25 billion revenue manufacturing company

“We are very early in making the link between Digital transformation and Sustainability...our focus thus far has been on cost savings and efficiencies.” “We see the transition to a more circular economy as critical and believe that technology is the key to making that transition possible, at scale. Many of the initiatives you've identified help drive that (whether the users realize it or not). For example, cloud provides users with on-demand access to services, storage, etc. that is scalable. Rather than investing in their own equipment and underutilizing it, public and hybrid cloud solutions help companies and individuals get the services they need without purchasing more resources (and the cloud providers can then manage more efficiently, using fewer resources themselves). Meanwhile, Big Data allows a company to dig deep into the structure of a system (e.g., their business operations) to identify opportunities for greater efficiency, etc.” “We have seen a considerable conversation related to Sustainability taking place on social media, not just among the general public but among Sustainability thought leaders and influencers. As such, we have taken this into consideration as we evolve our digital and social media efforts as an enterprise.” 84

Limitations of the Study A major limitation with the capstone was completing it under a strict time schedule. From beginning to end, including research, survey, writing the report and presentation was all completed in just under three months. This time constraint created limitations on collection of data, especially the survey results. Most of other industry surveys have responses from a bigger data set representing a larger number of companies. Though the response percentage to the survey was good, the time limitation allowed only reach out to about 150 companies and there were 28 responses received. With more time, the survey could have been sent to a larger number of companies resulting in a larger number of responses. A related limitation stems from the fact that the survey was anonymous, hence there could have been some instances of multiple responses from a single company, though on reviewing the individual responses, this should be a small number and is not expected to impact the Conclusions of this study. It is recommended to conduct a similar survey with a larger dataset of companies.

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Discussions, Conclusions, and Recommendations Discussions and Conclusions Responses to the capstone survey were received from multiple functional groups of the responding organizations. Several of these are from the Sustainability group of a company (Sustainability / Environmental Health, and Safety group). Other responses are from Operations, Marketing, Finance, Strategy, Procurement, Supply Chain, Engineering and Research, Public Affairs and Communication. The respondents are from large Fortune companies and represent a cross-section of industries (Figure 12 and Figure 13). A large percentage of respondents are Senior Management, with 17 of the 28 respondents at Director Level and above including one C level response and the rest are at a Manager level. Therefore, the responses to the Capstone Survey could be considered as being representative of a cross-section of industries. The Capstone Research findings are somewhat similar to findings from other researches, especially in relation to Digital Transformation. The top four responses to Business benefits from Digital Transformation (Figure 15) are Improving Customer Experience, Improving Operational Efficiencies, Building Competitive Advantage, and Cost Savings. Reponses along similar lines are seen for Adoption Drivers of CSR (Figure 20). These are Improving Operational Efficiencies, Improving Customer Experience, and Building Competitive Advantage. However, Risk Management, Brand Differentiation take precedence to Cost Savings in case of CSR adoption drivers. One response has been specific to identify Reputation Risk Management as a driver. The above responses are therefore in line with several other studies on Digital Transformation such as Fitzgerald (2013), Cap Gemini (2011), Kane (2015), Westerman (2011), referred earlier in the “Data and Results” section.

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The data from the Capstone Survey additionally indicates: 

High level of acceptance and recognition among organizations of the co-relation between Digital Transformation and corporate CSR, since the top drivers for CSR adoption and benefits from Digital Transformation are same.



Recognition of CSR as being important based on the multiple drivers selected by each responding organization. Further the survey results are also in line with other research findings such as

Rigby (2015), and Moritz (2014) about relevance of Digital Transformation elements. The survey shows Reporting and Analytics at the top followed by CRM (Figure 16). The survey additionally indicates recognition among organizations of the relationship between these elements and Sustainability (Figure 22). Topping this relationship is “Sustainability and Analytics” followed by “Sustainability and CRM”. Interestingly though, Mobility is ranked lower in the responses contrary to another research (HBR, 2015), which showed that Mobile Computing initiatives are more frequently adopted than the other three Digital Transformation mega-trends. Further, analysis of Case Studies and supported by Capstone Survey results provide following impacts and benefits of Digital Transformation with associated Sustainability aspects: 

Digital Transformation is being adopted by various functional groups within organizations.



Digitally transformed businesses are seeing improvements in Process Efficiencies.



Higher maturity organizations are using Digital to transform business and going ahead of competition implying positive Economic and reduced Environmental impacts.

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

Digitally transformed businesses are attracting employees, since it provides Digital opportunities, thus helping organizations in retaining talent, implying Social impacts.



Increase in Employee and Worker Productivity and Safety.



Faster Decision Making with leaner infrastructure thus ensuring Flexibility and Scalability in running businesses in response to demands.



Reduction in Carbon footprint.



Improvement in Supply Chain Tracking and better Quality Management resulting in reduction of losses, returns, and waste.



Meeting of Regulatory requirements.



Improvements that are specific to industries: o Engaged, enhanced, and remote Patient Care in Healthcare industry o Improved Traceability in Automotive industry o Social Investing and easy Banking in Retail Banking industry o Operational Optimization in Insurance industry



Emergency Management such as during floods, droughts, and wild fires. Thus the data from “Data and Results” section showcase the role that Digital

Transformation plays in enabling Corporate Sustainability and its link to the various elements of a business. Additionally, the data suggests that in a few organizations, Digital Transformation and Sustainability are forming part of the larger Corporate Strategy (refer Box 2). Notwithstanding the above conclusions, the Case Studies also indicate that link between Digital Transformation and Sustainability is mostly incidental and transactional in nature and not necessarily a result of a conscious strategy to drive Sustainability efforts of an organization. The link between Digital Transformation and Sustainability is not being clearly articulated or 88

acknowledged by organizations. For example, the results of the 2014 CEO survey by PwC (Moritz, 2014), has 86% of the surveyed US CEO’s listing technological advances as the trend that will transform businesses over the next five years with the top 3 being Business Analytics, socially enabled Business Processes and Mobile Customer Engagement, but the survey does not provide any data on CEO’s linking this to Sustainability impacts. The observation in the previous para is supported by the Capstone Survey results. To the question on “Sustainability related projects being undertaken” by a functional group, Figure 21, the highest percentage is for local Community projects, Renewable Energy projects, and Volunteer hours. The use of the term “Strategy” or “Strategic” for projects is limited to just a couple of responses. Moreover, while there seems to be a recognition of the roles played by Digital Transformation and Sustainability and the co-relation between the two, the Capstone Survey indicates a somewhat passive role played by functional groups in engagement with corporate CSR and strategy - Figure 17. The top two forms of engagement are “providing data”, and “attending periodic CSR meetings”. The third “Environmental LCA” shows active participation in Sustainability issues, though at a tactical level. A majority of the companies have Sustainability reporting with CDP and GRI leading in the type of report (Figure 18). Interestingly though, reporting as part of Triple Bottom Line annual accounting is a small percentage (11% of the respondents, refer Figure 18) pointing to the earlier indication about lack of an integrated approach to Sustainability. Couple of other observations based on additional respondent comments in Table 23 are: 

Newly formed organizations through mergers, acquisitions, etc. likely are in early stages of CSR initiatives (Comment 1).

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

The progress on linking Digital Transformation to Sustainability could be dependent on industry type, based on the comment “In Retail Soft-goods, for us, these are pretty distant from each other at this time.” (Comment 3). Another factor can be the size of an organization, based on the comment ““We are very early in making the link between Digital Transformation and Sustainability...our focus thus far has been on cost savings and efficiencies.” (Comment 4). Nonetheless, the data creates a case for Digital Transformation playing an important role

in ameliorating negative Sustainability impacts of business in a significant way. This is important since organizations are going to face increasing pressures from external stakeholders on Sustainability footprints of doing business. The analysis in this section was based on Capstone survey results from a smaller data set. This has also been noted in the “Limitations of the Study” section. It is recommended that the survey be conducted with a larger number of organizations to further validate observations and analysis of this section.

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Box 2 Couple of capstone survey responses indicating blending of Digital Transformation and Sustainability with Corporate Strategy: 

For the question “what business requirements are the Digital Transformation solutions addressing?” there is one response that states “Use in Strategy”. This response is from a Sustainability Manager of a Manufacturing company with revenue in the range of $10-$25bn. The company is using Digital Transformation areas of Big Data and Analytics for improving Operational Efficiencies, building Competitive Advantage, contribute to Sustainability efforts of the organization, Cost savings, Brand Differentiation, and Information Strategy. The company reports on CDP and GRI, follows ISO14001 standards, and has Renewable projects such as solar, wind, environmental projects mandated by an authority such as EPA, education projects, and strategy projects.



For the question “How is your functional group engaged with the corporate CSR program and strategy?” there is one response that states “This is not a program but a cultural transformation that engages all Operational, Supply and Manufacturing, and Leadership areas of the organization.” This response is from Sustainability Manager of a Healthcare company with revenues in the range $1 billion to $5 billion. Area of Digital Transformation adopted by the company is Cloud Computing. It follows GRI reporting and ISO4001, OHSAS 18001standards. Sustainability projects include Local Community, Renewable, Education, Healthcare projects, Coalition, Waste Management initiatives, and Biomass utilization. The functional areas being addressed by the Digital Transformation projects include CRM, Manufacturing solutions, HR related, Reporting and Analytics, Financial, Order and Supplier Management.

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Recommendations A Change Framework is suggested in this section which should provide a more holistic approach to making Digital Transformation a key enabler to organizational Sustainability efforts. The suggested framework is shown in Figure 23. The framework identifies four entities as being key to bringing change. These are Corporations (Corporates) and Businesses, Business Schools, Consultant Organizations, and Information and Communication Technology (ICT) organizations. The four entities have several interaction points: 

Significant proportion of Corporate Leadership and Consultants from consulting companies at some point have completed a Business Administration degree



Corporates (organizations) seek advice and feedback from consulting companies for inputs on strategic projects



ICT organizations provide Digital Transformation infrastructure, and solutions, such as software platforms, to organizations Inter and intra dynamics among these entities, helps create insights on integration points

between Digital Transformation, Sustainability elements and Business Processes and impact on selection of technology platforms. Some of the resulting sustainable business results are Business Efficiencies, Agility and Innovation, Cost Reductions, and Customer Experience enhancements. This framework is further explored and recommendations derived in the rest of this section.

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Figure 23. Change Framework 93

Interaction points between Consulting companies and Business Schools: There are several types of consulting organizations. A University of Chicago, Business consulting group in the year 2000 mentioned three types of consulting companies that are focused on Strategy consulting, Business Process Re-engineering and Specific services (Technology and Systems consulting, Human Resources consulting, Litigation consulting, Financial consulting, and Industry specific consulting) – derived from Das Consulting Case-book (Koblenz, 2000). Farber (2012) has defined three broad categories of consulting: Management / Strategy, Economic and Information Technology (IT) consulting. There are further stratifications in this field based on specializations such as Construction consulting, Government consulting, Small Business consulting, Environmental, Energy, and Sustainability consulting (Consulting, 2015). In the context of this section, Consulting companies refer to Strategy and Management consulting firms. The Case Studies and the data from the Capstone Survey, presented in the “Data and Results” section, suggests that the role of Digital Transformation and Sustainability in current business environment is driven by business contingencies rather than as a key component of an organization’s overarching strategy. A number of Digital Transformation Case Studies from large Consulting companies that resulted in sustainable results had increasing Profits or Cost Reduction as the key objectives and Sustainability results were incidental. For example, a decision to adopt Cloud Computing is made by an Information Technology department to move from a Capital Expenses model to an Operational Expenses model by adopting “as-a-service” framework, thus helping releasing funds for capex based projects and reducing the annual infrastructure and application maintenance costs. The reduction of the Carbon footprint in this case is incidental. 94

Business school graduates are the future leaders of the corporate world, as this group takes over the reins of corporate leadership. Current business programs focus on solving problems through solutions that are typically reflected in Case problems, many of which have been created by the Consulting organizations. Case is a way to solving business problems, and real issues that organizations face. Table 25 provides a list of some top Business schools, top Consulting companies and a fairly representative list of Case Scenarios culled from hundreds of cases created and being used by the Business schools and Consulting companies. These cases are practiced and used by Business graduates seeking a career in consulting and in the corporate world. These cases are being used here as a proxy to business problems faced by organizations across industries. The study of these Cases suggests that Case Scenarios and the various analysis approaches have not changed over the past 15 to 20 years. The frameworks (Table 24) for analyzing these cases have also remained the same with few changes and additions over this period. Table 24. Frameworks for Analyzing Case Scenarios 

The Four P’s



“Star” Diagram / Organizational Analysis



Porter’ Five Forces



The BCG Growth-Share matrix



The Four C’s



Value Chain analysis



Issue Tree



McKinsey’ 7-S model

Though the analysis using these frameworks can yield Sustainability results, as shown in Table 6 in “Data and Results” section, the analysis typically focuses on the Economic aspects based on one or more objectives set out for the Case Scenarios (refer Table 25).

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Table 25. Case Scenarios, Consulting companies, and Business Schools Name of consulting company  Accenture  Bain Consulting  Boston Consulting Group  PwC  Cap Gemini  Ernst and Young  Deloitte  McKinsey  AT Kearney  Darden Consulting  The Parthenon Group

Name of Business School                 

Case scenarios

Samuel Curtis Johnson Graduate School of Management, Cornell University Haas School of Business, University of California, Berkeley The University of Chicago, Graduate School of Business The Fuqua School of Business, Duke University Harvard Business School J.L. Kellogg School of Management London Business School Ross School of Business, Michigan University MIT Sloan The Jesse H. Jones Graduate School of Management, Rice University Stanford Graduate School of Business Leonard H. Stern School of Business, New York University Tuck School of Business at Dartmouth College The Anderson School, UCLA Wharton School of the University of Pennsylvania Yale School of Management Kenan Flagler Business School

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                    

Profitability improvement Growth through additional branches/ franchises Market expansion Competitive threats New market entry Marketing issues with new product launch Business Planning / Investments / Strategic Acquisitions Cost savings and cost management Guestimates / Valuation Safety Pricing Retention or exiting a business Industry analysis / Market sizing Address market share New product development and introduction Feasibility situations such as new distribution plan, etc. Reduction of inventory Correction to market valuation drop Business models analysis Determining demand for a product/ service and its elasticity Operations, marketing. Advertising analysis

The analysis does not consider the Sustainability impacts resulting from the decisions made to address the business situation captured by the Case Scenario. Typically, Sustainability metrics derived from ISO, ILO, Climate registry standards to reflect Greenhouse Gas impacts in terms of Scope 1, 2 and 3 emissions, impact on Water Resources, Energy Use, Waste Impact, and use of Renewable sources, Social impacts such as impact of Volunteer hours, are not considered in the analysis. Similarly use of Digital Transformation solutions are missing from the Case Analysis. Since the Business graduates will be the future business leaders and large Consulting companies are playing role of opinion makers / strategic solution providers to large organizations, absence of Digital Transformation and Sustainability metrics in the Analysis frameworks and Case Scenarios is a gap that should be addressed. It is therefore recommended that Business schools and Consulting companies re-define curriculums, Case Scenarios, and Analysis Frameworks, to reflect Digital Transformation and Sustainability aspects: 

Incorporating Sustainability program courses as part of the core curriculum to include topics such as Global Climate change, Digital Transformation aspects, Sustainable Finance and Investments, Applied Corporate Responsibility, and introduction to other Sustainability topics like environmental law and Environmental and Social Life Cycle Assessment (LCA).



Redefinition of Case problems to include Sustainability aspects as illustrated in Table 26. This approach will cultivate in this group of future leaders, who will perhaps head

Operations, Manufacturing, Quality Control, Finance, or be Investment Bankers and independent Entrepreneurs, an understanding about the Social, Environmental and Economic impacts of business decisions and knowledge about the tools, and frameworks available for developing solutions resulting in positive handprints (Swinhoe, 2012). Moreover, corporate leaders should 97

emphasize inclusion of knowledge and experience in Digital Transformation and Sustainability in the requirements criteria, at the time of lateral hiring at management level into the various functional areas. Table 26. Examples of Case problems with inclusion of Sustainability Aspects Issue area Corporate Strategy

Business Unit Strategy

Nature of issue Issue with Sustainability Aspects What business What options for a sustainable business do we have? should we be in? Which customers Are there customer segments that are sensitive to Sustainability do we serve? issues?

How does our product gain market share? How can we make more money? How should we run this unit?

M&A or Investment Strategy

What should we buy / sell? At what price?

How big is this market? What role can Sustainability play in gaining market share? What competitive edge does the company gain by re-defining markets and products that are sustainable? Are we in the business of just making money or is there a way to do so in a way that adds to the triple bottom line of the organization? What Sustainability aspects and considerations are important from the regulatory, operational efficiencies, labor arbitrage standpoints making for a sustainable way of running the unit? How does M&A make the organization sustainable?

Are there Socially Responsible funds that meet our target returns and what are the risks?

Is a company worth investing in?

Adoption of new Digital Transformation frameworks: In the “Data and Results” section, several frameworks adopted by consulting companies were presented – Figures 5, 6, 7 and 9. It is recommended that Sustainability aspects and parameters be considered and incorporated in such Digital Transformation frameworks. Additionally, create benchmarks in terms of Sustainability 98

measurements. For example, reductions in GHG emissions scope 1, 2, and 3 for a certain unit measure of a parameter (for instance Energy usage in Kilowatt Hours) that results from a Digital Transformation initiative. Table 20 and 21 provide a concrete example of reduction in energy use due to sustainable replacements effected by Broadband enabled / enhanced activity in terms of million barrels of oil saved. As an example and reference, two frameworks are analyzed here from the standpoint of incorporating Sustainability parameters. Example - Framework 1: Westerman (2014) has provided a framework, shown in Figure 24. There are four categories of Digital Mastery defined in this framework viz. Digital Masters, Conservatives, Fashionistas, and Beginners. The characteristics of each category is mapped to two axes Digital Intensity and Transformation Management intensity. Typical characteristics of each category is defined in the second column of Table 27. These characteristics are primarily driven by the Economic aspects of doing business. In order to adapt this framework to include Sustainability aspects, a broader matrix is required that incorporates a third Sustainability dimension. The lower end of the third axis will reflect Economic parameters with the current set of characteristics (second column, Table 27) for the four categories, while the top part of the third axis will reflect all three aspects of Sustainability including Environmental and Social impacts. In this revised matrix there would be eight quadrants. In addition to the features listed for each of the categories in Figure 24, there will be additional Sustainability characteristics as shown in the third column of Table 27. For example, in the category “Digital Masters”, additional characteristics could be an integrated Digital Transformation and Sustainability strategy. Similarly in the category “Conservatives” the additional characteristics could be well-developed Digital and Sustainability strategies but each works in a silo with limited interaction points. 99

Figure 24. Digital Maturity Matrix (Westerman, 2014; image reproduced from Westerman, 2011) Table 27. Additional Digital Mastery Categories (Based on: Westerman, 2014) Digital Mastery

Typical Characteristics

Additional characteristics

Category Digital Masters

Conservatives

     

Strong overarching Digital vision Excellent governance across silos Many digital initiatives generating business value in measurable ways Strong digital culture Overarching digital vision, but may be underdeveloped Few advanced Digital features, 100



Integrated Digital Transformation and Sustainability strategy.



Well-developed Digital and Sustainability strategies but each works in a silo with limited

Digital Mastery

Typical Characteristics

Additional characteristics

Category

  Fashionistas

    

Beginners

 

though traditional Digital capabilities may be mature Strong Digital governance across silos Active steps to build Digital skills and culture Many advanced Digital features (e.g., social, mobile) in silos No overarching vision Underdeveloped co-ordination Digital culture may exist in silos Management skeptical of the business value of advanced Digital technologies May be carrying out some experiments Immature Digital culture

interaction points.





Besides the silos in Digital culture, the Sustainability aspects exist in the form of reporting, and meeting statutory requirements, with isolated Green and Volunteer projects. The Sustainability aspects are restricted to just meeting the statutory requirements.

Example - Framework 2 IBM has defined a Digital Transformation framework (Berman, 2013), as shown in Figure 25. Adding a vertical axis to this framework that represents Sustainability measures, with the lower end of the axis representing only Economic parameters and top representing all three including Social and Environmental parameters, would change this framework to a Sustainability – Digital Transformation framework. The vertical axis could then represent “Sustainable Value Delivery Focus”.

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Figure 25. Digital Transformation Matrix (Berman, 2013) The top right quadrant in the Digital Transformation matrix in Figure 25 shows characteristics of “Flexibility”, “Integrated”, “Tailored”, and “Responsive”. By adding an additional axis, the upper quadrant above the “Transformation to an Individual-Centered” economy would further fine tune these characteristics in terms of Sustainability measures. Interaction points between ICT and Businesses: A study conducted by TBR (Allen, 2009) provides a perspective on the interaction between ICT and businesses. Some of the salient examples and observations from the study are: 102



“Wal-Mart, Nestle and other global conglomerates have emerged as the real leaders in exploring how software-driven Sustainable business practices translate to bottom-line financial results”.



Next generation software development would be driven by new metrics developed through collaboration between leading Sustainability firms such as Green Mountain Coffee, General Electric and IBM to help monetize environmental initiatives.



Corporations will rely on software vendors like IBM, SAP, Oracle, and Microsoft to facilitate corporate-wide Sustainability strategies.



Major alliances between ICT vendors and corporations is a key strategy for deploying Sustainability solutions.



“Software industry will have the greatest long term Corporate Responsibility impact by a factor of 100 or more over hardware”. The above findings from the TBR report create a case for ICT driving the long term

Sustainability goals of an organization. This is further supported by Laitner (2012) study which states that for large energy savings from ICT would require system and infrastructure improvements to be done at “Scale”, the latter referring to entire motor systems or large scale improvements that are enabled by ICT services. Ozzimo (2015) has presented a case of True Market Value of an enterprise being driven more by intangibles such as data and IP and less by tangible assets. The paper further states that all organizations will eventually become Digital businesses. Fitzgerald (2013) points to the fact that Digital Transformation needs to come from the top with specific dedicated executives or committee to drive the Digital efforts. A comment from one respondent to the Capstone Survey (Comment 5 in Table 23), a Marketing Manager of a $25 billion+ Computers and Electronics company, further provides 103

evidence to the role of Digital Transformation in terms of Sustainability impacts. Like Laitner (2012), the comment also highlights “Scale”. The comment is re-stated here: ““We see the transition to a more circular economy as critical and believe that technology is the key to making that transition possible, at scale. Many of the initiatives you've identified help drive that (whether the users realize it or not). For example, cloud provides users with on-demand access to services, storage, etc. that is scalable. Rather than investing in their own equipment and underutilizing it, public and hybrid cloud solutions help companies and individuals get the services they need without purchasing more resources (and the cloud providers can then manage more efficiently, using fewer resources themselves). Meanwhile, Big Data allows a company to dig deep into the structure of a system (e.g., their business operations) to identify opportunities for greater efficiency, etc.” The analysis thus far in this section articulates the case for ICT’s role in driving Sustainability through Digital Transformation. In order to achieve this, it is necessary to define the key stake-holders who will own the responsibilities of Digital Transformation. In a 2014 summit held for Digital Leaders (McCormack, 2014), the role of Chief Information Officer (CIO) and Chief Digital Officer (CDO) was discussed. Some of the salient discussion points include the blurring boundaries between the role of a CIO and other C level executives due to the impact of Digital Technologies, how IT can enable Business Process change and Technology Innovation and the significance of Digital Information. Two studies, shown in Table 28, present distinctive traits for a digital ready CIO and traits for a CDO.

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Table 28. Traits of Digital Officer – CIO and CDO CDO’s skills set

Six distinctive traits of Digital ready CIO      

Have a strategic vision about Business Transformation enablement by technology In a constant state of Innovation Focus is on growth and relationships that support growth Ensure that their vision is communicated and understood Go beyond the call of a CIO’s traditional role of managing operations and infrastructure Risk takers

Source: Lonergan, 2014

     

Change Management and Leadership Understanding of business drivers Being able to collaborate across business divisions and evangelize ideas Information Governance Data infrastructure and design Methods and Tools

Source: Teerlink, 2014

Combination of Business, Technology, People skills with Change Management, Collaboration and ability to Evangelize Strong alignment to Sustainability aspects of the business

It is recommended that to these traits, which represent a combination of Business, Technology, People skills with Change Management, Collaboration and ability to Evangelize, is added the additional ability to align with Sustainability aspects and impacts of the business. Based on the above and data on Sustainability impact of Digital projects from the “Data and Results” section the following recommendations are being made: 

Digital Transformation and Sustainability should, together, be recognized as strategic imperatives by organizational leadership.



Organizations should seek long term partnerships with ICT companies in Digital Technology areas. This will ensure long term Sustainability results linked to Digital Transformation.

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

Identify a single person or a committee that also has sufficient influence on an organization’s strategy to carry the responsibility for Digital Transformation of the organization. This person may be the Chief Financial Officer (CFO), Chief Information Officer (CIO), Chief Technology Officer (CTO) or a separately designated Chief Digital Officer, depending on the internal dynamics of an organization. However, the need for a role focusing on Digital Transformation of an organization is essential.



The Digital strategy must be aligned to the Sustainability strategy of the organization and therefore the heads of Sustainability, Strategy and Digital should work together in defining the strategic initiatives and projects. In this section, recommendations for changes in the roles of four key players as defined in

Figure 23 have been discussed. These are the Business schools, Management Consulting organizations, ICT companies and Businesses / End User Organizations / Corporations. Enhancement in the roles of these entities, as discussed in this paper, will result in adoption of Digital Transformation as a strategic wedge to drive Sustainability results. This will result in significant amelioration of the negative footprints and substantial enhancements in the positive handprints of doing business across industries. This approach will also ensure organization’s long term financial stability, enhanced brand and stock-holder valuations and will positively position an organization among stake-holders such as Government, NGO’s and other players.

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Appendix I

Survey for a "Digital Transformation and Sustainability" capstone project by a Harvard University Graduate Student Notes: a. If you are authorized to respond on behalf of another person, please provide the response to the questions, in terms of that person. b. The survey refers to "Functional group" meaning your functional area. "Organizational level" is in reference to the entire organization. c. Digital Transformation refers to Mobile Computing, Social Computing, Cloud Computing, Big Data, Analytics, Customer Relationship Management, and other equivalent trans-formative technology areas. 1. Please indicate your organization's industry. Agriculture & Mining Business Services Computers and Electronics Consumer Electronics Energy and Utilities Financial Services Healthcare Pharmaceutical Biotech Manufacturing Media and Entertainment Real Estate and Construction Retail Software and Internet Telecommunications Travel, Recreation and Leisure Wholesale and Distribution Other:

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2. Please provide your organization's size in terms of the annual revenues in USD. $500 million - $ 1 billion $ 1 billion - $ 5 billion $5 billion - $ 10 billion $ 10 billion - $ 25 billion > $ 25 billion Other: 3. Please provide your level in the organization. C-Level VP-Level Director-Level Manager-Level Other: 4. Please provide your functional area in the organization. Sales Marketing Finance Administration Human Resources Sustainability Engineering and Research Operations Information Technology & Information Services Supply Chain Procurement Other:

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5. Has a Digital Transformation Initiative been taken up or is under consideration in your functional area? If your answer is "No", you may choose to go to 10, or answer the questions 6 to 9 at an organization level. Yes No 6. What area of Digital Transformation Initiative has been undertaken or is being undertaken in your functional area? Mobility Analytics Cloud Computing Social Computing Big Data Customer Relationship Management Other: 7. What business requirement areas are the Digital Transformation solutions addressing? E-Commerce Enterprise Collaboration Reporting Work Force and Field Force Automation Customer and Marketing Analytics Risk and Operational Analytics Sustainability requirements - please specify in "Other" Industry Specific, please provide some detail in "Other" Other:

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8. What are the business benefits from the Digital Transformation Efforts? Improving Customer Experience Improving Operational Efficiencies Building Competitive Advantage Contribute to Sustainability efforts of the organization Cost savings Brand Differentiation Risk Management Reduced Scrutiny Faster Time to Market Industry Specific, please provide some detail in "Other" Other: 9. Which functional areas are being addressed by the Digital Transformation projects? Order Management Supplier Management Financial Management Reporting and Analytics Human Resources related Manufacturing Solutions Customer Relationship Management related Industry Specific, please provide some detail in "Other" Other: 10. Does your organization have a Corporate Social Responsibility (CSR) program? Yes No

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11. How is your functional group engaged with the corporate CSR program and strategy? If the answer in 5 was a "No", please answer this question from an organization level perspective. Providing data Attend periodic CSR meetings Function has its own defined Sustainability approach distinct from the Corporate CSR Environmental Life Cycle Assessment Social Life Cycle Assessment Business Agility Scalability Not Engaged Other: 12. At an organization level what CSR reporting does your company provide? Carbon Disclosure Project Global Reporting Initiative Part of Triple Bottom Line Annual Reporting UN Global Compact Other: 13. What are some of the CSR standards adopted by your organization ISO 26000 ISO 14001 ISO 50001 ISO 31000 OHSAS 18001 PAS 2050 Other:

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14. What are some of the drivers for adopting CSR within your organization. Improving Customer Experience Improving Operational Efficiencies Building Competitive Advantage Cost Savings Brand Differentiation Health and Safety Mandatory Requirements such as EPA Risk Management Reduced Scrutiny Transparency Industry Specific, please provide some detail in "Other" Other: 15. What are some of the Sustainability related projects being undertaken by your functional group? If there are none or the answer to 5 is a "No" please respond at an organization level. Local community projects Volunteer hours Renewable energy such as solar, wind, etc. Environmental projects mandated by an authority such as EPA Education projects Healthcare projects Workforce Inclusion and Diversity Industry Specific, please provide some detail in "Other" Other:

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16. Please indicate any relation that is visible between your group's Digital Transformation efforts and Corporate Sustainability initiatives at the group and / or organization level. Please add a few lines in explanation in "Other" or in "17." below. If the answer in 5 was a "No", please answer this question from an organization level perspective. Sustainability and Mobility Sustainability and Analytics Sustainability and Cloud Computing Sustainability and Social Computing Sustainability and Big Data Sustainability and Customer Relationship Management Other: 17. Please provide additional comments in context of the subject of this survey, that is, relationship between Digital Transformation and Sustainability at the functional group and / or organization level.

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