Applied Analytics and Leading Change

Module 8

March 18, 2024

Applied Analytics Program

Agenda and Learning Objectives

Digital Transformation

After completing this module, you will be able to:

• Evaluate the similarities and differences between digital transformation and other types of
organizational change
• Explain the requirements for successful digital transformation, and how traditional
companies can transform
• Apply the concepts of empathy and human-centered design to digital transformation
In the News…

What Will AI Do to Your Job? Take a Look at What It’s Already Doing to Coders

“Companies have tended to fire their newest employees, and that in 2023, software
engineers represent the largest share of people laid off by tech companies. The few tech
job openings that remain, meanwhile, are being snapped up by still-in-demand, more-
experienced software engineers.”

The result of widespread automation has been the elimination of countless roles, and
their replacement with ones that require either relatively little skill and knowledge, or a
great deal more, with workers at either end of this spectrum being rewarded accordingly.

“One of the main challenges of the future is how to hire junior people who don’t yet have
the experience to step in when the machine doesn’t work,” - Yossi Sheffi, MIT

https://www.wsj.com/articles/ai-jobs-replace-tech-workers-8f3dc92?mod=tech_lead_pos10
Digitization vs Digital Transformation

https://www.youtube.com/watch_popup?v=jbj4wwchkcE&start=87&end=220&rel=0
Digitization vs Transformation - Pagers

https://www.npr.org/transcripts/1197955913
In the News…

Amazon is introducing an array of new artificial intelligence and robotics capabilities named Sequoia into its
warehouse operations that will reduce delivery times.

The innovation will change the way Amazon moves products through its fulfillment centers with new AI-equipped
sortation machines and robotic arms. It will also alter how many of Amazon’s workers do their jobs.

Sequoia is designed for both speed and safety. Humans are meant to work alongside new machines in a way that
should reduce injuries.
• Labor researchers and activists have said Amazon’s desire for faster speeds can put its workers at risk, and some
have warned that the introduction of robotics could also heighten employee injuries. Amazon has struggled with
high turnover among its warehouse employees and repetitive stress injuries.
• Sequoia reduces the time it takes to fulfill an order by up to 25%, and it can identifies and stores inventory up to
75% faster.
https://www.wsj.com/tech/amazon-introducing-warehouse-overhaul-with-robotics-to-speed-deliveries-40e3e65
Role of the CEO in digital transformation

Business model reinvention requires functions across the organization to work together in new
ways - Requires large-scale investments and large-scale changes that start from the top down

Areas of focus for CEO

• Reimagine where transformative rather than incremental value is possible
• Target a domain of the business, e.g., a core process or user journey, for focusing energy
• Communicate a higher purpose
• Apply technology and data to solve business problems or enable new opportunities
• Simplify the most important processes and build a culture that learns so the business can
adapt quickly

https://hbr.org/2021/12/the-ceos-playbook-for-a-successful-digital-transformation
Digital Transformation Journey

Rethinking of how an organization uses technology, people, and

processes in pursuit of new business models and new revenue
streams, driven by changes in customer expectations around products
and services.

• Align objectives with business goals - business outcomes to achieve

for customers
• Redesign business and products around customer outcomes
• IT and business co-create
• Retrain employees around digital

https://www.cio.com/article/230425/what-is-digital-transformation-a-necessary-disruption.html
Digital transformation enables customer value creation
From
that drives financial performance Strategy
and
Analytics

Financial outcomes of the strategy

Value proposition for the targeted customers

Context for intangible assets to create value

Critical processes that are have the

greatest impact on the strategy

Intangible assets that are most

important to the strategy;
aligned to the internal processes

https://creately.com/blog/diagrams/what-is-a-strategy-map/
Digital strategy – Customer Experience

Under Armour Connected Fitness – Digital platform to track, analyze and share personal health
data directly to customers’ phones. Create a customer experience tailored to each consumer.

• Merged its physical and digital offerings to provide an immersive customer experience via
products such as Armourbox.
• Urged customers to go online and share their training schedule, favorite shoe style, and
fitness goals.
• Used advanced analytics to send customers new shoes or apparel on a subscription basis,
offering customers a more significant value over their lifetime.
• Moved to an agile development model

https://whatfix.com/blog/digital-transformation-examples/
Digital strategy – New Business Opportunity

Amazon Business - transition to B2B space to keep up with the digital customer expectations.
Provides marketplace for businesses to purchase from Amazon and third parties.

B2B US wholesale market valued $7.2-8.2 trillion

• Created a holistic marketplace for B2B vendors by offering over 250 million products
ranging from cleaning supplies to industrial equipment.
• Introduced free two-day shipping on orders worth $49 or more and exclusive price
discounts.
• Offered purchase system integration, tax-exemption on purchases from select qualified
customers, shared payment methods, order approval workflows, and enhanced order
reporting.
• Allowed manufacturers to connect with buyers & answer questions about products in a live
expert program.
https://whatfix.com/blog/digital-transformation-examples/
Organizations need to be “bi-focal”

Organizations have to handle two disparate things:

• The tasks of reliability AND the tasks of speed and agility

Hierarchy and control - Central mechanisms

to execute operating plans

Networks and leadership - Core

mechanisms to drive strategic initiatives
 Digital Transformation and Change

Change management theory - organizations move from current state to a transitional state and
then on to a future state.
• The transitional state is a period of time in which an organization shifts from familiar
structures, processes, and cultural norms to new ones.
• Everyone’s task is to negotiate between the organization’s past and its future.

In a digitally driven world there is no end point to the transitional phase

• Digital tools change constantly and rapidly, as do the knowledge and skills necessary to use
them.
• Organizational structures must be continually tuned to make use of new data insights, and
leaders must keep working to bring employees along as the organization evolves.

Neeley, T. and Leonardi, P. (2022) Harvard Business Review 100, 50-55

AI, augmentation and competitive advantage

Adapt operating model to support augmented work:

• Adopt product-focused ways of working - teams are given goals to meet, not tasks to
complete
• Utilize data-driven insights - Process mining to analyze the effectiveness of business
processes
• Enable collaboration across the ecosystem - streamline work across the ecosystem

https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/augmented-workforce
Digital Transformation Challenges

An average of 87.5% of digital transformations fail to meet their original objectives

• Overly optimistic objectives in terms of both the timing and the scope of the
outcome
• Poor execution
‒ lack of proper governance
‒ prioritizing technology deployment over user adoption
‒ adopting the wrong metrics
• Pace of leading and managing the transition between the current state and the
desired state – digital learning curve

https://hbr.org/2022/09/3-stages-of-a-successful-digital-transformation
Change and the Information-Action Paradox
Information-action paradox: Breakout discussion –
• Need for convincing data to make the case that Digital transformation of education
transformation is necessary
• Shrinking window of opportunity with availability of • What information might educators
public data about disruptive trends and market shits want before investing in edutech?
• How would you make the case for
change in the absence of complete
information?
• If you were a university president,
and you waited for edutech
providers to learning outcomes
data, what would happen to your
Threshold
Burning Platform
range of opportunities?
for action

Time

Siren, P.M.A.; Anthony, S.D.; Bhatt, U. (2022) Harvard Business Review 100, p49-53
Digital Mindset
“With a digital mindset, what we end up learning is that humans with
digital skills will replace humans without digital skills. For far too long
we’ve worried: Will machines replace us? Is automation going to be the
end of many of our careers? But the reality we’re seeing years into this
digital ecosystem, or digital context, is that people who have a digital
mindset will be the ones who will be leading the way, compared to people
without a digital mindset.”
Digital mindset - set of attitudes and behaviors that enable people and
organizations to see how data, algorithms and AI open up new
possibilities and to chart a path for success in a business landscape
increasingly dominated by data-intensive and intelligent technologies.

“This is the reality. It’s not going to be tenure, or seniority, or rank.

It's going to be: Who has a digital mindset, and who doesn't?”

Neeley, T. and Leonardi, P. (2022) Harvard Business Review 100, 50-55

Successful Digital Transformation

Leadership that provides a company with the ability to continuously envision and drive
transformation that leads to business results.
• Drive organizational change, not just technology adoption

Successful companies:
• Build digital capabilities by embedding the right technologies into the right parts of their
customer experience, operations, employee experience and business models
• Close collaboration between digital, IT and business units on the broad digital transformation
agenda
• Move at a pace that allows you to learn quickly and scale effectively. Innovate at the right
speed for the business and its customers, especially if the company can leverage assets that
competitors don’t have.

Westerman, G. (2022) MIT Sloan Management Review, 63, 1-4.

 Digital Transformation
Digital change is often radical, and it involves
changing shared values, norms, attitudes, and
behaviors.

Digital transformation often encounters resistance

Companies do best when they focus on two critical

areas:
1. Preparing people for a new digital
organizational culture
2. Designing and aligning systems and processes

Neeley, T. and Leonardi, P. (2022) Harvard Business Review 100, 50-55

Phases of digital transformation
1. Leaders sell the digital transformation - explain the benefits of digital
change to the workforce
‒ Creates frame of reference so people understand the
technology they’re being asked to implement
2. Employees decide whether to use the new technology
‒ Consider whether the technology enables them, as individuals, to
carry out the goals announced by the company’s leaders
3. Employees decide how they will use the new technology
4. Employees change their behavior
– When employees start performing new roles, they start
interacting with different people, forming new social networks
5. Local performance improvement - concrete gains visible
6. Local performance aligns with company goals - meet key goals by
employing technologies that improve local processes and results.

Plan in reverse - Assess what company goals you can achieve locally with new digital tools; build from there
Leonardi, P. (2020) MIT Sloan Management Review. 61, 28-35.
Change management stages

https://www.aihr.com/blog/digital-change-management/
Digital Transformation KPIs

Digital strategy is a means to achieving measurably better business outcomes, not an end

KPIs should measure business value delivered by the transformation, not the technology
infrastructure
• Reflect increased customer value and revenue growth
• Operationally align digital capabilities with desired business outcomes
• Balanced focus on leading and lagging indicators of outcomes
• Establish direct, observable links between KPIs and the strategic objectives
• Structured to uncover root causes

Schräge, M., Muttreja, V. and Kwan, A. (2022) MIT Sloan Management Review. 63, 35-40
Digital Transformation

Research of drivers of success of digital transformation from 150 companies across industry sectors.
Successful transformation at scale requires synergy in three areas:

Capabilities Technology Architecture

• Develop digital and data • Investment in elements of an • Investment in organizational
skills in employees outside AI stack: data platform and technical architecture to
traditional technology technology, data engineering, ensure that human capabilities
functions machine-learning algorithms, and technology work in
• Invest in developing and algorithm-deployment synergy to drive innovation.
process agility technology • Architecture that supports
• Create a culture that • Technology is easy to use and sharing, integration, and
encourages widespread, accessible to nontechnical normalization of data across
frequent experimentation. employees traditionally isolated silos.

Iansiti, M. and Nadella, S. (2022) Harvard Business Review 100, 42-49.

Capabilities for digital transformation

• Create ambitious and focused transformation roadmaps - align efforts on specific domains
(e.g., journeys or processes) that matter to customers and generate significant value.
• Build a quality digital talent bench - prioritize creating an environment that attracts top-
notch digital talent and allows them to thrive (e.g., tailored career tracks, autonomy).
• Operating model where hundreds of small cross-functional “pods” made up of business,
engineering, and resources from control functions are mobilized against priority solutions.
A single journey (or product) owner responsible for the end-to-end experience.
• Distributed technology environment and modern software engineering practices to allow
the entire organization to develop digital and AI-based solutions.
• Data products and modern data architecture that make it easy for different parts of the
organization to consume data for their own applications.
• Change management to ensures digital solutions are adopted and can scale by making
them easy to use and reuse across the enterprise.

hbr.org/2023/07/the-value-of-digital-transformation
Tech Intensity

Satya Nadella coined the term tech intensity - combination of technology adoption and technology
creation.

Organizations need to be a fast adopters of best-in-class technology

• Access the latest platforms, tools and training, so that they don’t have to re-create technology
that already has been commoditized.

Organizations need to build their own unique digital capabilities

• Invest in human capital, so that they have a workplace culture that encourages capability-
building and collaboration to spawn new, breakthrough concepts

https://www.linkedin.com/pulse/necessity-tech-intensity-todays-digital-world-satya-nadella/?published=t
Data Intensity

Follow-on to Tech Intensity – the attributes and properties of the data, e.g.,
volume, velocity, types, structure, and how data is translated into value

The data intensity of an organization increases as

• It manages a greater diversity of data (e.g., by volume, type, speed)
• It becomes more data literate
• It adopts more data-driven technologies (e.g., data integration, data flows,
no-code ELT)
• It builds its unique data-driven content (e.g., predictive models)

https://venturebeat.com/datadecisionmakers/data-intensity-could-be-the-new-kpi/
Lyft
Developed a reinforcement learning model to predict “More important than the math is how do you do
what will happen next, i.e., forecast what the situation this within the company”
will look like over the next few minutes • Reinforcement learning means that the humans
involved don’t always know what’s going on
After >1 year of refining, algorithm outperformed the
• Team was able to convince the rest of the
original matching one across all important measures:
company to let it keep experimenting. - “It’s the
• $30 million dollars a year in increased revenue same way you do things anywhere. “You talk to
• Corresponding increase in drivers’ earnings the right people. You earn the trust of people.
• Passengers were 3% less likely to cancel a ride You form a team that is excited and then you
request show proof that it works. It’s common in
research to think that the idea itself is enough.
• 13% fewer ride requests resulted in no available But in an organization, it’s the process that leads
driver to something happening.”
• Passengers’ five-star reviews increased

https://insight.kellogg.northwestern.edu/article/at-their-best-self-learning-algorithms-can-be-a-win-win-win
CX + DT = Business Transformation

“A combined CX-design approach

that harnesses design methods of
researching, defining opportunities,
generating ideas, and prototyping
before launching and scaling
provides more and deeper customer
insights and helps brands connect
with customers across all their
journeys in a seamless, end-to-end
experience.”

https://www.mckinsey.com/business-functions/growth-marketing-and-sales/our-insights/cx-without-design-only-gets-you-halfway?cid=other-
eml-alt-mip-mck&hdpid=3755a749-54b7-4162-8a5a-50363280fe92&hctky=2562956&hlkid=cd8a07fc057b407c9b6d18bd96aaf6ec
Design-Driven Innovation

INITIATING a project INVESTIGATING and INTEGRATING insights IMPLEMENTATION, which

based on a problem validating the customer and ideas into prototypes, involves designing, testing and
hypothesis, and creating needs associated with framing and reframing the implementing final prototypes
a project (design) brief the problem hypothesis; problem to solve, and and delivering a solution to the
and research plan to researching, collecting testing prototypes with problem; followed by evaluating
investigate the assumed and analyzing data; external and internal the solution to determine if the
problem. ultimately defining needs stakeholders. problem was solved or not.
and the right problem to
solve.
Beausoleil, A. Rotman Management. Spring2022, 44-49.
Digital Transformation

https://www.youtube.com/watch_popup?v=JgwRn-axYr4&start=32&end=230&rel=0
Digital adoption and labor productivity growth
Key Values of Digital Culture

Westerman, G., Soule, D. L., & Eswaran, A. (2019). Building digital-ready culture in traditional organizations. MIT Sloan Management
Review, 60(4), 59-68.
Digital transformation and culture
Digital transformation requires a balance between:
• Cultural change - how a digital transformation
may alter an organization’s culture
AND
• Cultural continuity - elements of the culture that
remain stable

Change without continuity results in chaos

Continuity without change results in conservatism

Digital transformation at Maersk:

• “Technology company where we have some
physical devices we need to move around.”
• Maritime business contributed 78% of group
revenue and has 12,000 seafarers - “We are NOT
a tech company who ‘happens’ to operate ships.”

Pedersen, C. L. (2022) MIT Sloan Management Review. 63, 1-4.

Spectrum of practices to make values real

Westerman, G., Soule, D. L., & Eswaran, A. (2019). Building digital-ready culture in traditional organizations. MIT Sloan Management
Review, 60(4), 59-68.
Digital Transformation
How can legacy companies become more agile and innovative?

Understand the key values Adopt or refine critical Retain:

of digital culture: practices: • Integrity
• Impact • Rapid experimentation • Stability
• Speed • Self-organization • Employee morale
• Openness • Data-driven decision • Heritage
• Autonomy making
• Obsession with
customers and results.

Westerman, G., Soule, D. L., & Eswaran, A. (2019). Building digital-ready culture in traditional organizations. MIT Sloan Management
Review, 60(4), 59-68.
John Deere
“How 185-year-old John Deere is embracing digital
transformation”
• Edge computing
• Data factory - reliable data that cuts
across silos of manufacturing,
engineering, supply chain to enable core
analytics function
• Agile operating model across the business

https://vimeo.com/726157926
https://venturebeat.com/2022/08/01/how-185-year-old-john-deere-is-embracing-digital-transformation/
 Remote Working
Causal analysis of natural experiment using emails, calendars, instant
messages, video/audio calls and workweek hours of >60,000 US
employees over the first six months of 2020.

Shift to firm-wide remote work

• Caused business groups to become less interconnected
• Reduced the number of ties bridging structural holes in the
company’s informal collaboration network
• Caused individuals to spend less time collaborating with the
bridging ties that remained.
• Caused employees to spend a greater share of their collaboration
time with their stronger ties, which are better suited to
information transfer, and a smaller share of their time with weak
ties, which are more likely to provide access to new information.
Yang, L., Holtz, D., Jaffe, S. et al. The effects of remote work on collaboration among information workers. Nat Hum Behav (2021).
https://doi.org/10.1038/s41562-021-01196-4
Four types of connections

Emergence/creativity ties - bridging across expertise domains, functions, clients, and cultures

Capability development ties - people whom you normally seek out or who voluntarily offer you
feedback

Depth/best practice transfer ties - people with similar expertise who can help promote depth,
currency, or efficiency in your work.

Sense-making/political awareness ties - people who help you get an accurate picture of the
network and how to position ideas

Cross, R., Arena, M., Sims, J. and Uhl-Bien, M. MIT Sloan Management Review. 58, 39-47
Digital collaboration

Traditional hierarchical silos can be broken down by forming cross functional teams

The challenge with collaboration among specialists or geographically dispersed colleagues is that
their work is often invisible to one another
• Digital collaboration tools provide a space for employees to work together, and they make that
work visible to other people within the company

Networks are critical to the movement of knowledge and information in the digital age
• Digital collaboration tools enable employees to build and leverage networks of regular
collaborators across project teams
• Platforms broadcast information about employees’ expertise and internal resources, creating
metaknowledge and allowing people to create a roster of distant connections that can be
activated as needed

Leonardi, P. (2021) MIT Sloan Management Review. 62, 1-7.

The importance of collaboration

The level and quality of interpersonal collaboration has the greatest impact on employee engagement
• Greater than a sense of purpose
• Organizational network analysis - employee engagement is determined by the ability of leaders
to foster interpersonal networks and a culture of collaboration.

Workday - leaders place a high premium on interpersonal collaboration

• Leadership development programs are designed to help foster connection building and nurture
relationship networks throughout the company
• Look to hire people who are oriented toward being empathetic and seem like they would be able
to put themselves in service to colleagues and customers

Employee attrition is low, and 95% of employees say it is “a great place to work.”

Cross, R., Edmondson, A. and Murphy, W. (2020) MIT Sloan Management Review. 61, 37-43.
Adaptive Space – Digital Innovation
Agility is more social than structural
• Underlying networks reflect the relationships and actions
that foster agility.
Adaptive space:
• Is the relational, emotional, and sometimes physical space necessary for people to freely
explore, exchange, and debate
• Creates connections that allow people to discover, develop, and diffuse new ideas
throughout an organization by tapping into the power of network dynamics
• Is the bridge between agile/entrepreneurial/reinvention initiatives and the imperative to
maintain stable, scalable operations. Local teams are empowered to innovate and problem-
solve on their own, while also focusing on long-term outcomes

Arena, M. (2021) Management and Business Review 1, 86-91.

 Social Networks
Brokers - facilitate discovery process through their social
connections and then determine how and when these insights
can be introduced to other parts of the organization.
• Adaptive space enables brokers to more actively connect and
navigate beyond their local subgroups to explore new
possibilities.
• Brokers are outstanding at finding ideas, they are not always
best positioned to drive implementation

People whose Connectors - well-positioned to garner support for ideas from

connections within a given group
span groups
• Essential to the development and implementation process
• The level of trust within subgroups facilitates engagement
with ideas, learning, and risk-taking, which are crucial
components of creativity and development

Energizers - individuals who enthusiastically adopt an idea and

promote it.
People who are well- • Help push people beyond the safe bets by triggering the
connected within their interest and engagement of others and unleashing the
subgroup passion necessary for bold innovations to advance

Cross, R., Arena, M., Sims, J. and Uhl-Bien, M. MIT Sloan Management Review. 58, 39-47
Next Class

Assignment 4 due March 31

Next class - Design Thinking

• Brown, T. & Martin, R. (2015). Design for Action. Harvard Business Review
• Tschimmel, K. (2012). Design Thinking as an effective Toolkit for Innovation.
• The Explainer: Design Thinking. Harvard Business Review