Value-Add Through Digital Transformation for Enterprises ... · Enterprises and Public Sector...

Copyright 2015 TCI Transformation Consulting International GmbH

Mannheim – Munich – Hamburg – Zurich – Riyadh

www.tci-partners.com – [email protected]

Seite 1 von 16

Value-Add Through Digital Transformation for Enterprises: Analysis and Planning

Michael Grözinger, TCI Partner, 26. November 2015

http://www.tci-partners.com/

mailto:[email protected]

Copyright 2015 TCI Transformation Consulting International GmbH Mannheim – Munich – Hamburg – Zurich – Riyadh

www.tci-partners.com – [email protected] Page 2 of 16

Table of Contents

Value-Add Through Digital Transformation for Enterprises: Analysis and Planning ....... 1

1 Management Summary ...................................................................................... 3

2 Digital Technologies and their Wide Usage Provide a Huge Potential for New and

Sustainable Business ......................................................................................... 4

3 Digital Transformation Requires Different Approaches .......................................... 6

4 Technological Developments and Their Potential .................................................. 7

4.1 Mobile Solutions ............................................................................................ 7

4.2 Big Data, Machine Learning, Data Mining ......................................................... 8

4.3 Social Media .................................................................................................. 9

4.4 Internet of Things .......................................................................................... 9

5 Identifying Areas of Action for Digital Transformation ......................................... 11

6 Due-Diligence Digital: Comprehensive Analysis and Planning ............................... 12

6.1 Phase I: Handlungsbedarf ............................................................................ 13

6.2 Phase II: Digital Capabilities ......................................................................... 14

7 Using a Due-Diligence Digital for Analysis of the internal IT ................................ 15

8 Implementation ............................................................................................... 16

9 The next step .................................................................................................. 16





1 Management Summary

Enterprises and Public Sector around the world engage in Digitalization, Industry 4.0, Business 4.0 and

Digital Transformation.

Driven by the wide availability on internet based services, integration of voice and data transmission as

well as the increasing number of devices and sensors in the Internet new opportunities and challenges

for efficient process and procedures arise in enterprises of all size. For companies this means that there

is the potential to address more customers faster and new business models can be offered,

respectively. The following are just a few examples:

Process outsourcing of customer complaints and return shipments based on online platforms

and external services providers, respectively. This also includes an update of the existing CRM

system

Predictive Maintenance of systems including a fully automatic order management and

accounting of services and materials

Paperless online-supported talent search and hiring process

Yet, how can digital technologies be used to support internal processes? How does your company get

from simply using sensors on the shop floor to a sensible support of your business processes? Which

projects give the greatest return and with which processes should you start first?

In your role as general manager, head of marketing or as responsible manager for sales or production,

you are faced with the challenge to find a good answer to all those questions.

In this document we show the possibilities of digital transformation and show our methodology, the

Due-Diligence Digital, which supports you to draw the most of digital technologies. The benefits depend

of course on your particular situation in the market and internally, as well as where you want to get to

the next time.

This is independent of the size of your organization. A first analysis with a Due-Diligence Digital can be

endeavored in a small and medium-sized company as well as a business unit or department. The

methodology is designed to fit your requirements.





2 Digital Technologies and Their Wide Usage Provide a Huge Potential for New and Sustainable Business

The prognosis for the number of users in the Internet or devices and machines, respectively, connected

to the internet are tremendously high. The German business daily newspaper Handelsblatt1 reports that

the worldwide number of smartphones increases from 6.3 bn. in 2010 to 9.4 bn. in 2020. In the same

time period the number of machines connected to the Internet will grow form 1.2 bn. to 15 bn., which

means an CAGR. of 25%.

In 2012 1.06 bn. people use a smartphone. This number more than doubles in 6 years (2.54 bn.). Even

more impressive is the amount of data stored in IT systems. It will increase from 1.2 bn. to 40 bn. in

2020. Of which the data volume stored in cloud services accrues from 0.05 TByte (4.2 % of total) to 15

bn. TByte (37.5 % of total) in the same time period.

Another factor that pushes the usage of digital technologies in enterprises is the so-called

consumerization of IT. In our private environment we use many of the above mentioned devices or are

subscribers of the different Internet-based services. We learn how to deal with this equipment and

those services, which is key to employability. In addition, it raises our expectations as employees to get

access to similar tools in our working environment.

First market analysis and projects indicate the possibilities and the financial potentials2. In a study

concerning Industry 4.0 Bitkom together with Fraunhofer IAO3 identified that the economic benefit in

selected market segments has a positive impact of 23% overall (2012 – 2025), a CAGR of 1.27 %.

This means that next to the increase of efficiency of IT usage the expectation for new business models is

even higher.

Across all market segments there are many examples, where companies leveraged the capabilities

provided by ICT and have revolutionized complete market segments. Many of those examples are

Internet-based business models, as Google Search and the underlying ad-driven business model. Or the

Amazon business, which has even been innovated further to a complete new set of cloud services,

called Amazon Web Services. There Amazon is one of the market leaders next to Microsoft.

The adoption of digital technologies is not limited to business models in the Internet. If we consider

industrial production, we observe amongst others, that it must be organized more flexible in order to

meet requirements of a lot size of one. The individual steps in a production chain are designed as

autonomous units, they can be controlled and supervised via a network. This also leads to a large

amount of data, which can be used in various ways. One option is to analyze the data with models

1 Source: Handelsblatt, Nr. 200, from the weekend 16.-18. October 2015, pages 52 and following. The article is looking at the book

„The Second Machine Age“, by Erik Brynjolfsson and Andrew McAfee, for which the authors obtained the „Deutscher

Wirtschaftsbuchpreis 2015“.

2 An example of using Machine Learning and the visualization of data was implemented by Microsoft at Thyssen Krupp Elevators in

the US: http://www.microsoft.com/en-us/server-cloud/customer-stories/Thyssen-Krupp-Elevator.aspx. Here data from control

systems of elevators all over the world are collected centrally in a cloud application and the decision for maintenance is controlled by

an application build as a machine learning model.

3 Source: https://www.bitkom.org/Publikationen/2014/Studien/Studie-Industrie-4-0-Volkswirtschaftliches-Potenzial-fuer-

Deutschland/Studie_Industrie_40.pdf (last viewed 5.11.2015)



http://www.microsoft.com/en-us/server-cloud/customer-stories/Thyssen-Krupp-Elevator.aspx

https://www.bitkom.org/Publikationen/2014/Studien/Studie-Industrie-4-0-Volkswirtschaftliches-Potenzial-fuer-Deutschland/Studie_Industrie_40.pdf

https://www.bitkom.org/Publikationen/2014/Studien/Studie-Industrie-4-0-Volkswirtschaftliches-Potenzial-fuer-Deutschland/Studie_Industrie_40.pdf



which are trained for particular tasks. This is called “Machine Learning” and can be used for quality

assurance, amongst others4.

Another important trend is called the Internet-of-Things or IoT in short. It basically means that more

and more devices, sensors, etc. are connected to the Internet, so they can be integrated into business

processes. This makes the processes more flexible and it even enables new business models. So if a

machine control system in an industrial production environment provides data on the current situation

of this machine, it is possible to process this data and to discover if predictive maintenance is required.

The new business model derived from that development is pay per time of usage than pay per product

plus fixed maintenance contract.

4 One vendor is Warwick Analytics. Here is an example of their system for quality improvement in production:

http://www.warwickanalytics.com/downloads/automotive-downloads-resources.





3 Digital Transformation Requires Different Approaches

As described above, the task of planning and implementing digital transformation is well beyond classic

IT Services Management (e.g. as laid out in ITIL). It means that for performing a sound planning of a

digital transformation additional approaches ensure success.

First and foremost, it is important to understand it as an over-arching task across the complete

organization, and not something that is delegated down into the IT or another part of your organization.

We need to add elements of classical strategic planning in order to gain a holistic view, which is critical

to a successful digital transformation.

In particular, it is important to analyze the business model itself and the competitive environment. If

this is supported by a sound SWOT analysis, digital transformation has a good foundation.

If required digital transformation can also be individually broken down onto business or functional units.

Those can be particular core processes, like production, or internal IT itself, as there we also encounter

an “internal user journey”, which will be explained below.

The most promising area to gain benefit from digital technologies is the customer and partner interface,

which is controlled by a system called “Customer Experience Management (CEM)”. It looks at

customers’ expectations and how they are met currently. This is a very advanced approach, and of

course requires focus and effort to implement and maintain such a process. If a company has no such

CEM in place, one element of it that is useful is the evaluation of the customer journey. This is often

used in marketing planning or during the design and implementation of web properties. It needs to

comprise usage, maintenance and replacement as a key area of analysis. From there we can identify

areas which need to be considered in more detail.

Up until now, we have not looked at the capabilities of a company, whether they are available at all and

to what degree they are implemented in a digital fashion. This can be accomplished with the support of

different models. We use the model of a capability map as a basis. This model has the advantage, that is

distinguished between the “What” a company needs to do to meet their business objectives rather than

“How” this is done. We evaluate each capability according to the current level of digital implementation

versus the required level, in terms of quality and quantity. The “Digital Map” indicates areas where

there is the need of action. As we also look at the identification of new business models, we need to

consider the capabilities of products sold, as there is the potential that they need digital

implementation in part. For instance, in machine tool industry a module is required that enables

supervision and control of a machine.

As a result, a list of activities is available, which can be prioritized according to different criteria. We use

the required effort do digitize versus the business impact which helps to identify “quick wins”.

A Due-Diligence Digital is a first step into digital transformation with limited effort in time and budget. It

gives a first direction, which helps to focus accordingly.





4 Technological Developments and Their Potential

Amongst the many new and old technologies, those relevant for digital transformation are described

below. It is no technical description; it focusses on the features and the potential use of a technology.

4.1 Mobile Solutions

Many business processes benefit from different kinds of mobile devices, by making those processes

available on different locations for mobile users. This also driven by the broad availability of this devices

in our private environment. This challenges people who are in charge of IT in a company, the so-called

“Bring-your-own-Device” situation. On the other hand it enables more efficient processes.

New possibilities are for instance to use the privately owned smartphones by truck drivers to integrate

them into a logistics process. This requires an app in the app store of a platform vendor like Apple,

Microsoft or Google, an authentication and authorization system as well as a secure communications

channel through the Internet5.

Another key factor for performing mobile solutions is the software development platform provided by

the vendors. They are developed further towards a “write-once-use-on-any-device” approach.

4.2 Cloud Computing

As Cloud Computing emerged, it was quickly put into the category “old wine in new skins”, as the

foundation of it is the virtualization of operating systems and applications. A technology that has been

used on mainframe computers for a long time.

But this misses the point. Cloud Computing today offers to use computing capacity in a reliable, flexible

and cost-effective fashion. If requirements for capacity changes for an application, the cloud can be

adapted easily and quickly. Of interest here is the payments due adapt as well. If an internet shop is run

in the cloud and Christmas time comes closer, new capacities are booked as much and only as long as

need.

This is feasible through the high degree of automation in the cloud data centers together with a set of

ready-to use solutions, called Software as a Service (SaaS). Solution platforms are also at hand with a

huge range of programming languages and programming models, they are known as Platform as a

Service (PaaS). A real important step forward was Infrastructure as a Service (IaaS), which enables you

to instantiate as many servers you need with pre-configures images, being a Linux Server or a Windows

Server. Platform as a Service is often used to build web sites or similar web properties. PaaS is

nowadays extended to enabler for powerful solutions based on the Machine Learning paradigm.

Initially the usage and control of cloud services was complicated. You had to build your local image of a

Server with its applications and then load it onto the cloud platform of your choice. Today the cloud

service providers offer self-service portals which provide a large set of preconfigured solution scenarios.

5 http://www.hamburg-port-authority.de/de/presse/pressearchiv/Seiten/Pressemitteilung-02-09-2015.aspx



http://www.hamburg-port-authority.de/de/presse/pressearchiv/Seiten/Pressemitteilung-02-09-2015.aspx



Those are for instance web hosting on WordPress or Typo3. It is only required to select the details and

everything, including the set-up of an underlying NoSQL data base, is performed automatically.

In the above example with the web shop the parameters in the self-service portal are changed online

and the availability of the shop is increased. This potentially increases your user experience and

hopefully sales via the shop, as the shop is much more responsive. Many cloud platforms even offer

automatic surveillance of the performance of servers and if set increase the available capacity

automatically.

In many scenarios like in health care solutions the need is given to meet certain data protection

requirements. In Germany this means that health data must be stored on the premises of the

organization in charge of the data. This can be met if part of the solutions is hosted in a so-called private

cloud. The other solutions like a public web site for general information are put into the public cloud.

Of particular importance is here, as pointed out above, data privacy and data protection. This covers the

operations of data centers in the EU and “abroad”. In order to avoid wrong decisions and

implementations it requires to consult certified data privacy officers. This, for legal reasons, cannot be

part of a Due-Diligence Digital.

4.3 Big Data, Machine Learning, Data Mining

As mentioned many times in this paper, the amount of data generated in all kinds of business processes

increases tremendously. Being sales or customer data or data obtained by operating a production plan.

Even more dramatic is the increase if the Internet-of-Things paradigm becomes reality. The challenge

here is the cheap and high-performance storage of data. If data is located in data bases or so-called

“Blob Storages” in the cloud, the challenge is how to draw conclusion form this information and

integrate it into your business models and processes.

This are tasks like prediction of figures in production or sales. Amazon uses solutions to propose

products to customers through a solution based on a “recommender system”. It looks at usage and

purchase patterns of a particular customer and other customers and comes up with an offer like “Other

customers who bought that product also purchased…..”. Another promising scenario is “Predictive

Maintenance”. There patterns are identified in the data collected from many machines located at

customer premises. If the data is classified as “this machine runs into a problem with the following part”

a customer visit can be planned before the machine stops operation. That approach allows to save costs

on both sides, the vendor and customer.

The underlying technologies can be deployed in local data centers or can be purchased as services from

the cloud (e.g. AWS Machine Learning or Microsoft Azure Machine Learning). Those services come with

an easy to use tool set for designing and evaluating machine learning experiments, as they are called.

They support supervised and unsupervised learning, classification, prediction of many kinds6.

6 One solution from the cloud is PowerBI in Microsoft Office 365





4.4 Social Media

Social Media like Twitter, Facebook or Instagram are widely used by consumers. How much of them are

of use in commercial business processes?

For instance, along the customer journey Facebook can be used for branding. Even companies selling to

commercial customers are represented in Facebook7.

Social media can also be used internally in companies. Microsoft offers, for example, as part of

Office365 cloud services a service called Yammer. It is a service similar to Facebook, used in commercial

scenarios and closed user groups. It also has amongst others points the potential to reduce the amount

of e-mails.

So Social Media Services run as public services and as an individual proprietary services enable more

efficient communications and are “more modern”, in a sense that it meets customer’s expectations

much better8. This is of importance to attract employees in the younger generations.

4.5 Internet of Things

The functionality to read the status of devices via a network or to control devices that way has been

available for a long time. This started with the availability of networks in the enterprise environment.

Today you can configure a network router or a Wi-Fi switch via your network at home and by using a

standard web browser.

Internet-of-things is far beyond that scenario. The reason for that is that many more devices of much

smaller dimensions get an Internet connection. This is feasible due to the increasing miniaturization of

electronics. And that does not focus on smart watches, which collect a lot of data, which then can be

collected by a smartphone via Bluetooth. Here we consider sensors in logistics processes that provide

the information on the position and the route of a forklift truck or simply a goods container.

With this information new business processes are possible or existing processes can be optimized.

Imagine you can graphically analyze the path of a fork lift truck and identify inefficiencies in the

sequence of tasks provided to its driver.

As mentioned earlier, Internet-of-Things also provides huge potential in maintenance of machine tools.

If one has access to a large set of parameters online, those can be evaluated and better decisions on

next steps are possible in order to keep the up-time of that machine as long as possible. It means saving

costs on both sides and a better customer relationship.

The McKinsey Global Institute has analyzed the impact of Internet-of-Things on the relevant markets

and obtained impressive results.9: “The Internet of Things has the potential to generate an economic

impact from $2,7 bn. to $6,2 bn. until 2025“.

7 An example for consumer products is https://www.facebook.com/BMW?fref.ts or for consumer goods

https://www.facebook.com/pages/SIEMENS-AUTOMATION/158839340874635?fref=ts

8 A very good example is the “Business Service Portal” of T-Mobile in Germany

9 Quelle: McKinsey Global Institute http://www.mckinsey.com/insights/business_technology/disruptive_technologies



https://www.facebook.com/BMW?fref.ts

https://www.facebook.com/pages/SIEMENS-AUTOMATION/158839340874635?fref=ts

http://www.mckinsey.com/insights/business_technology/disruptive_technologies



The above mentioned examples (e.g. Thyssen Krupp Industries) were not feasible without Internet-of-

Things technologies.

A very critical point is data security, as Internet-of-things means that mission critical data as well as

personally identifiable information (PII), which fall under the control of data protection legislation, are

transmitted via the Internet. In order to meet the related requirements, in the area of Industry 4.0

standardization new protocols are developed. One project is a communication architecture called OPC-

UA, which provides functionality for authentication and authorization on top of a secure

communications channel. OPC UA is based on the Internet protocols UDP and IP, which can be handled

with standard Internet communication nodes. It is owned by on international standards consortium and

receives broad support in industry10.

10 Die Organisation ist die OPC Foundation: https://opcfoundation.org/





5 Identifying Areas of Action for Digital Transformation

One basic aim of a Digital Transformation is, as mentioned above, to strengthen the market position of

a company, by leveraging the right digital technologies in the right place. It is therefore important not to

focus on internal IT in the first place. Furthermore the scope needs to extended beyond the classic

business processes to the functionality of products11.

Next to a generic analysis of our corporation with generic tools of strategic analysis, a very effective

approach is to take the perspective of customers and partners and analyze your business from their

perspective, in particular how your products are used or how the interaction with your business process

like support appear to them. This means collaboration with customers and partners is more effective

and therefore your customer relationship is improved.

In order to do that successfully, you can use the model of the customer journey. It is part of a more

overarching customer experience management and covers the areas from branding to the decision of a

customer to purchase a product or service. By working along that journey it is possible to identify media

gaps or inefficiencies which need to be improved in a digital manner.

This is true for externally focused processes as well as internal processes and systems. It can be

employed to model the “internal user journey” of the users of your internal IT.

For new business models like “predictive maintenance” this model must be extended to the phases of

using, maintaining and replacing a product. In fig. 1 the phases of a Digital Transformation are depicted

at a high level.

By working through the above steps it is possible to identify potential areas of improvement and we

obtain a catalogue of potential steps during a digital transformation.

The next important question is, whether an organization has the right capabilities in place and are those

available in a digital fashion? In order to achieve that, we propose to use a model in which the

capabilities are broken down in a tree structure. Looking at capabilities has the advantage, that a

capability covers “What” an enterprise has to be able to do in order to achieve its business objectives.

This in contrast to “How” something is achieved. For that there is a series of options for

implementation. We evaluate for each capability the current and required degree of digitalization in

terms of quantity and quality. The resulting “digital map”, as we call it, identifies areas (in a color

coding) which need further evaluation in terms of digital implementation. We also added a

measurement of the financial effort of a potential digitalization.

11 See the cases of „predictive maintenance“ where the functionality of machine tools needs to be extended in order to provide

relevant information via networks.





Fig. 1: Phases of a digital transformation

5.1 Due-Diligence Digital: Comprehensive Analysis and Planning

The approach to analyze and plan a digital transformation, which we call „Due-Diligence Digital”, is

based on the principles laid out above. There are different tools available that make this endeavor more

efficient.

Fig. 2: Steps of a Due-Diligence Digital

Fig. 2 shows the sequential structure of a project based on a Due-Diligence Digital. In the beginning we

look at your overall situation in the market in order derive guidelines for the ensuing analysis. This is

represented by the box at the top to the left.

The following phases are explained in more detail.





5.1.1 Phase I: Where to start

The objective in the first phase is to identify any kind of areas where there is need to work on in order

to improve business processes or customer experience. It is not that we work out concrete areas of

action, but we can see that your web site is not set-up as your customers expect it or if your customers

use your services they have to change from one media, they print out a PDF document, to another by

filling in the form and then re-scan it.

In order to get a holistic picture of your situation, we look at:

future perspective: vision, mission, objectives, etc.

your current market position: SWOT, competitive situation, business model

your expectations: improved key figures, new business models, new markets

The business model can be easily summarized with a „Business Model Canvas“12 (figure 3).

Fig. 3: Structure of the Business Model Canvas

In working on this model, the following questions are of interest:

How do you integrate your key partners into your business processes?

What are your key activities and can those be optimized in a digital fashion?

How does your sales force work today? Is your stock level of particular products known to the

sales force? Are all contracts put into a central database? Is the status of all orders known to

the relevant people or even to your customers?

What is your value proposition? Simply products or products supported by a service portfolio,

which is measured in terms of quality and availability?

Which market segments do you address today? Are there options to use new digital sales

channels to reach out to more customers?

12 https://de.wikipedia.org/w/index.php?title=Business_Model_Canvas&action=edit&redlink=1





How do you purchase pre-products or raw material? Can you leverage cost advantages through

implementing a purchasing portal or use an existing one?

The right part of a business model canvas reflects the customer interface. In our experience, there lie

large opportunities for benefits through digital transformation. The results of a customer experience

management or an initial customer journey analysis provide useful guidelines.

Over all it is important not to try to develop a new strategic direction for a company. A Due-Diligence

Digital focuses on planning a digital transformation.

At the end of this phase, we have an understanding of the areas which need more detailed analysis,

which we now evaluate in terms of the capability of an organization to implement the required digital

functionality.

5.1.2 Phase II: Digital Business Capabilities

Our next task is to identify if the required capabilities are in place and if to what degree they are

available as digital capabilities. So “order product” is a capability that can be implemented with a paper

form, which is sent by snail mail, or with digital means it is implemented via an online form, which is

connected to the order management system in the background. The comparison of the required level of

digital implementation and the as-is status enables us to identify those capabilities with high values as

delta and those with a high average delta. Fed into business analysis tools the results can be visualized

and the right conclusions can be drawn.

Figure 5 shows the results of the work in Excel. The top level capabilities, we call them domains, are

depicted in the table and in the supporting diagram below. From the diagram it can be identified that in

some domains the delta is low, so not necessarily work is required. Others, however, have large delta

and some extreme maximum values. Now we can go deeper into the model to see where that stems

from.

Fig. 4: Results of a capability assessment





Through that process we identify concrete areas and projects. We can then evaluate them against their

value add and the effort for digital transformation. This is shown in Figure 6.

Thereby we can look at actions with high

impact and low effort, which are the quick

wins. In Fig. 6 the actions top right are the

ones which are the more complex ones, but

provide impact in the long term.

Those are for instance new products or new

services for which we need complex

supporting systems or new technological

developments.

Fig. 5: Prioritizing activities





6 Using a Due-Diligence Digital for the Analysis of your Internal IT

Next to the consideration an enterprise from their customer’s point of view, we can use the Due-

Diligence Digital for an investigation of how well the internal IT is supported by digital technologies.

Rather than evaluating the external customer journey we look at the “internal user journey”. Often IT

Service Management is structured according to ITIL. The ITIL process description can be worked through

and we can see where the user journey can be optimized in order to save IT costs or to make business

processes more effective. This can be the reset of a password or the set-up of a new mail account

In principle the analysis is equivalent to a customer journey, but it is useful to work with the following

phases:

Service Request

Incident Processing

Service Up-date

Services Refresh

From this analysis we get input we then process with a digital map, which then provides a digitalization

plan.

7 Implementation

The results of a Due-Diligence Digital are the basis for a project portfolio which can be fed into the

overall project organization, using the typical project management methods, agile or classic.

8 The next step

The assessment of a digital readiness with a Due-Diligence Digital enables you to start your digital

transformation with the right steps. A first project can be scoped as a “Quick Check” and after an initial

evaluation a broader approach can be taken or even applied to a department or a business unit.

The partners of TCI are you counterparts to enter in an initial discussion, in which we get to know your

environment and your challenges, based on which we can provide you a customer offer for successful

projects.

Come to us, we strengthen your market position, by successfully using the right digital technologies.



Date post:	21-May-2020
Category:	Documents
Upload:	others
View:	5 times
Download:	0 times

Value-Add Through Digital Transformation for Enterprises ... · Enterprises and Public Sector...

Documents