The Challenge of Digital Transformation Karim R. Lakhani | Harvard Business School

1

Most Technological

Predictions Are

Wrong In 1982 - AT&T asked McKinsey to

forecast US cell phone market in year

2000

McKinsey noted:

Heavy handsets

Low battery power

Patchy coverage

Exorbitant prices per minute

Forecasted 900,000 subscribers by 2000

Delayed serious entry into market by

AT&T for several years

By 1992 - AT&T Had It Figured

Out?

3

What

Happened? All key innovations were forecasted by

AT&T

Core assumption was that AT&T would

deliver both devices and services

Major business model impediment of

providing “pipes”

Major missed opportunities

Yet - $127B in revenue & $7.2B in

profits in 2012

RIP Blackberry & Nokia

5

Rigid Assumptions About Product and

Business Model Killed Blackberry Keyboard —> Touch

Small (black & white screens) —> Large Color

GPRS —> 3G to LTE

Conserve Bandwidth —> Bandwidth is Free

Limited Web —> Full Web Experience

Business —> Consumer

Data Center —> Cloud/Apps

Channel Love —> Channel Tension

Revenue Sharing —> Subsidy/Data Plan

“The iPhone did many amazing things, but what stands out in my mind was how

it proved that these assumptions were flat-out wrong beyond any reasonable

doubt. Apple pretty much gave everyone the finger and said, "Fuck you guys we

can build your distant impossible future today."

6

All the

Technology

Replaced

by the

iPhone

Is a Pizza Company a Tech

Firm?

8

Domino’s Invests in Massively in

Digital Technologies to Re-invent

Firm IT is the largest department in the company

“Ordering pizza is Domino's entire business. What we saw

then and continue to see now, is consumers prefer digital

ordering over any other type. "It’s got better repeat, higher

spending, customer satisfaction is higher, they order new

products at a two-to-one ratio, and then there’s all the data to

learn from.”

New technologies improve same store sales by 14%

$2B in digital sales (35% mobile)

9

The Future of Pizzas?

10

Digital Communities Drive Creative Destruction in

Advertising

11

Impacting the Auto Industry

12

Signs of a Deep

Transformation “My own theory is that we are in the middle

of a dramatic and broad technological and

economic shift in which software

companies are poised to take over large

swathes of the economy.

More and more major businesses and

industries are being run on software and

delivered as online services—from movies

to agriculture to national defense.”

-Marc Andreessen (2013)

More Than Four Decades of

Investment

14

More and More Digital Devices

15

Declining Computation Costs

16

Leading to an Explosion in Digitized

Information

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Digital Transformation is Making Every

Company into a Software and Services

Company

Digital transformation re-architects transactions and processes…

Digitizing process components

Distributing transactions more easily

Connecting with other businesses, forming large digital networks,

accumulating and communicating lots of data

Generating opportunities for powerful analytics

… ultimately transforming business models, organizations, cultures

and ecosystems

18

New Capabilities & Strategies

Needed To Execute Digital

Transformation New Strategies

Shift from products to

services + products

Cultivating platforms &

ecosystems

Developing new revenue &

business models

Talent and new business

incubation

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New Capabilities

Data gathering and

management

Advanced analytics

Realtime monitoring and

control

Software development

excellence