Lessons from the Leaders Taking Digital Transformation to the Next Level Digital Transformation Review Twelfth Edition2 Taking Digital Transformation to the Next Level: Lessons from the LeadersDigital Transformation Review Twelfth Edition Taking Digital Transformation to the Next Level: Lessons from the Leaders Edited by the Capgemini Research Institute The Capgemini Research Institute is Capgeminis in-house think tank on all things digital. The Institute publishes research on the impact of digital technologies on large, traditional businesses. The team draws on the worldwide network of Capgemini experts and works closely with academic and technology partners. The Institute has dedicated research centers in India, the United Kingdom, and the United States. It was recently ranked number one in the world for the quality of its research by independent analysts. Visit us at capgemini/researchinstitute/ #DTR12 3Introduction Saskia Steinacker Torbjørn Folgerø William Ruh Barbara Martin Coppola Sabine Scheunert 06 14 28 38 46 20 14 Industry Leader Perspectives The changing nature of digital mastery Bayer Equinor formerly with GE IKEA Daimler AG Advancing digital in health and nutrition Scaling digital initiatives to build sustainable solutions in the energy sector Culture and talent accelerate GEs transformation from industrial conglomerate to digital services provider Giving “160,000 entrepreneurs” the liberty and freedom to drive digital transformation Accelerating digital innovation by transforming culture, collaboration, and talent Contents 4 Taking Digital Transformation to the Next Level: Lessons from the LeadersFrédéric Levaux Mrutyunjay Mahapatra Dr. Kai-Fu Lee Eric Chaniot 90 98 54 74 90 60 82 66 Views from a Thought Leader Capgemini Perspective Legrand formerly with State Bank of India Sinovation Ventures Michelin How collaboration and culture change have driven new digital innovations Taking a 200+ year-old bank to the digital age Superpowered perspectives from an AI expert, investor, author, and influencer Lilian Tomovich Rahul Welde MGM Resorts International Unilever Sparking the wow factor through digital and human connections Consumer-first approach accelerates digital transformation A start-up culture drives digital transformation at tire and mobility giant 5Introduction by the Capgemini Research Institute The changing nature of digital mastery 6 Taking Digital Transformation to the Next Level: Lessons from the LeadersThe rules of the game have changed. An array of advanced technologies from artificial intelligence to the internet of things are reinventing how organizations create value. However, significant questions still remain about what capabilities and leadership qualities are required to seize this opportunity, particularly in terms of employee engagement, talent, and culture. In this Digital Transformation Review, we interview a range of digital leaders, providing a first-hand, global perspective on the key capabilities and characteristics required to succeed in a world where what we understand as digital transformation is evolving fast. We spoke to leaders from large multinational corporations across a broad spectrum of industries, including automotive, consumer goods, energy, entertainment, financial services, industrials, life sciences, and retail. A number of critical lessons and insights emerged: There has been a pivot from a top-down approach to top-down and bottom-up. In our interviews, Mrutyunjay Mahapatra, formerly with State Bank of India, discusses the importance of having digital champions. The employee experience is increasingly important. Employees want to be engaged and participate in the strategy of the business and organizations need to motivate, engage, and excite their people. Upskilling and reskilling through education and training are key here, as well as opportunities to collaborate across functions and share innovative ideas through smart platforms. Unilevers Rahul Welde outlines why it is important to treat employees like customers. Whatever your strategy, if people are not sold on it, there will be a problem. We are setting up centers of excellence where there will be focused teams of people who are trained in digital technologies. These people will be the champions of digital change.” Mrutyunjay Mahapatra, formerly with State Bank of IndiaWe think of our employees as consumers. We therefore aim to create a similar wow effect with learning and culture change as we do with our brands for consumers.” Rahul Welde, Unilever 7 A new generation of leaders is required. Bill Ruh, formerly with GE, explains why more executives need to engage more deeply with digital technologies. New cultural frameworks are pivotal. Daimlers Sabine Scheunert outlines why todays talent will be looking for those organizations that can offer a stimulating and non-hierarchical culture. There is a need to marry governance frameworks with local needs. Governance is key to ensuring accountability for digital initiatives and consistency across geographies. However, as well as clear global governance frameworks, digital initiatives need to reflect local market and organization needs. Michelins Eric Chaniot outlines why robust governance arrangements need to be also sensitive to local market needs. Communicate, communicate, and communicate! Daimlers Sabine Scheunert emphasizes how transparency and openness are key to effective communication.Establishing a positive, non- hierarchical, productive, and exciting working culture, as well as new working methods, coupled with ground-breaking projects, that move the world, is key to both attracting and retaining talent.” Sabine Scheunert, DaimlerOn top of our strong governance, the Digital Direction is located across the world through our digital factories. This ensures a stronger proximity to our internal business partners and a better understanding of local market specificities, both from an employee and a customer perspective.” Eric Chaniot, MichelinThe most crucial success factor is transparent and open communication equally through all levels.” Sabine Scheunert, DaimlerMost leaders dont have a digital background. In fact, one could say that they are reticent to engage with digital . You cannot just dictate being digital you must know it and fully embrace using digital in everything that you do. Engaging with technology is a prerequisite for leadership.” Bill Ruh, formerly with GE 8 Taking Digital Transformation to the Next Level: Lessons from the Leaders Organizations need to find and define their purpose. Many consumers today, especially millennials and other next generations, place significant importance on sustainability and social issues. They expect to see those same philosophies and beliefs in the brands that they interact with and support. Bayers Saskia Steinacker outlines how organization purpose offers a positive vision that key stakeholders from employees to consumers can engage with. We focus on making people understand that digital is not a thing in itself, but it is a means to contribute to our vision of feeding an ever-growing world population and fostering health.” Saskia Steinacker, Bayer Delivering digital mastery: a Capgemini perspective In this edition, we also present the key findings of our extensive global research of over 1,300 executives “Understanding digital mastery today: Why companies are struggling with their digital transformations.” We found that many organizations are struggling to turn their digital investments into business successes. Only 39% have the digital capabilities required Only 35% have the leadership capabilities required 9Our research pinpoints the best practices of a small cohort of high-performing organizations the digital masters who have critical digital and leadership capabilities in place. We hope this edition of the Digital Transformation Review offers both insight and pragmatic ideas for action. Please reach out to us if you would like to discuss any of these topics and the implications for your organization. Source: Capgemini Research Institute, Digital Mastery Survey; AprilMay 2018, N=1,338 respondents, 757 organizations; Capgemini Consulting and the MIT Center for Digital Business, “The Digital Advantage: How digital leaders outperform their peers in every industry,” 2012, N=391 organizations. *Calculated based on the average percentage of organizations agreeing to the questions in each category (rating of 5, 6, 7 on a scale of 1 to 7); Questions included in this analysis are the same in 2012 and 2018. Please visit us at capgemini/researchinstitute/ or write to us at researchcapgemini Percentage of organizations believing they have the required capabilities Digital Capabilities 2012 2018 39% 39% 45% 35% Leadership Capabilities 10 Taking Digital Transformation to the Next Level: Lessons from the Leaders11Leader and Expert Interviews 1 8 4 7 3 10 2 6 5 12 Taking Digital Transformation to the Next Level: Lessons from the LeadersNorway Torbjorn Folgero, Equinor Bergen 3 United States Saskia Steinacker, Bayer New York 1 United States William Ruh, formerly with GE California 4 Denmark Barbara Martin Coppola, IKEA Copenhagen 5 India Mrutyunjay Mahapatra, formerly with State Bank of India, Mumbai 9 Germany Sabine Scheunert, Daimler AG Stuttgart 2 United States Lilian Tomovich, MGM Resorts International Nevada 7 United States Eric Chaniot, Michelin North Carolina 8 France Frédéric Levaux, Legrand Paris 6 United Kingdom Rahul Welde, Unilever London 10 China Dr. Kai-Fu Lee, Sinovation Ventures Beijing 11 9 11 13Saskia Steinacker, Bayers global head for digital transformation, is responsible for driving the digital mandate across the group together with the Digital Excellence Council, a cross- divisional/functional group of executives. She has played a key role in developing the companys digital agenda with a focus on new business models to accelerate growth. The digital agenda enables the organization through a shift of mindset and culture, optimized technology, rapid processes, effective partnerships, and expert knowledge on data. The Capgemini Research Institute spoke with Saskia to understand more about Bayers digital transformation to foster new solutions in the areas of health and nutrition. Bayer: Advancing digital in health and nutrition Saskia Steinacker, Bayer Industry Leader Perspectives 14 Taking Digital Transformation to the Next Level: Lessons from the LeadersWhat is your mandate as global head of digital transformation at Bayer? Bayer is organized into three divisions pharmaceuticals, consumer health, and crop sciences. To drive the digital agenda across the Group, we established the “Digital Excellence Council,” which has a sponsor from the Board of Management and executive representatives from all the divisions, countries as well as from group-wide functions, such as IT. This council covers the entire digital agenda from driving the digital mindset and leveraging data to building infrastructure and fostering partnerships required for digital growth. My role is to drive the Group-wide digital transformation together with this council. Where is Bayer today in its digital transformation journey? We are in the midst of our digital journey, and we are learning as we go in this fast and iterative process. Today, technological advancements and evolving customer needs and expectations are compelling organizations to think of new and innovative business models. For our digital transformation, we are focusing on three things: firstly, digitizing the customer experience; secondly, digitizing our operations; and thirdly, new business models. What does that mean for our customers and patients? In the area of crop science, we want to help farmers make better decisions based on the insights we get from data provided by sensors or drones. In the area of health, we want to bring new medicine to patients more efficiently and much faster. We want to tailor treatments to individual patients, assist healthcare professionals in getting to the right diagnosis, and offer new non-pharmaceutical solutions. Operations are becoming digitized across our entire value chain to have effective and cost-efficient functional areas. For example, at our pharmaceutical manufacturing site in Garbagnate, Italy, we deployed a digital twin-based scheduling program to drive improvements in our quality-control lab. The site was just recognized amongst the nine world-leading smart factories by the World Economic Forum. Bayers digital transformation journeyTo drive the digital agenda across the Group, we established the Digital Excellence Council, which has a sponsor from the Board of Management and executive representatives from all the divisions, countries as well as from group-wide functions, such as IT.”For our digital transformation, we are focusing on three things: firstly, digitizing the customer experience; secondly, digitizing our operations; and thirdly, new business models.” 15New business models to maximize the value for the customer How has digital changed your relationship with customers? Digital has given us an opportunity to have multi- directional interactions with our customers. Newer digital channels enable us to co-create with the customer take clinical trials, for example. We could use the data of smart health devices to monitor a patients health. The patient could stay at home and would not need to come to a clinic for health checks. Our vision is to get closer to the customer. In our digital health space, we have apps to help our patients manage their conditions. For example, the myBETApp helps people with multiple sclerosis manage their injections. We also have the Skin Peace app, which is a tool for patients with eczema that calculates the right amount of topical treatment needed. In the future, digital technologies will make it possible for us to identify diseases and illnesses at a much earlier stage with the help of artificial intelligence that recognizes patterns. Then, when people are ill, we can provide more individualized treatment. In digital farming, we already have a solution, which makes it possible for the farmer to calculate the right time and appropriate dose of fertilizer or crop protection needed for every square meter of ground. This is not only making farming more efficient, but also much more sustainable.Digital has given us an opportunity to have multi-directional interactions with our customers.”Our vision is to get closer to the customer. In our digital health space, we have