OUR

DIGITAL WORLD!
DIGITAL TRANFORMATION? WHAT?

“It’s like teenage sex,”. “Everyone talks about it, and nobody knows how to do
it, but everyone thinks everyone else is at it. In the end, you’ve just need to be a
bit daring and just go for it.”

Arjan Sissing, SVP Deutsche Post DHL Group

WHEN YOU PEEL THE COVERS……
WHY 84% OF COMPANIES FAIL AT DIGITAL TRANSFORMATION?

Source: Forbes & Innosight

TO UNDERSTAND DIGITAL TRANSFORMATION, WE NEED TO….

v Apply Model Thinking

v Understand what is change and how to manage it
v Understand what is complexity and how it affects business
v Understand what is a system and how to analyze it
v Understand how to recast our functional business understanding in to the
digital world and update ourselves
v Develop soft skills that are as important than the hard skills
v Develop Leadership styles that is suitable for the complex digital world
THE COURSE PLAN – HOW & WHAT TO THINK

WHAT THIS COURSE IS:

• Review of Business Functions with a Digital Lens
• Industry Lens for 4 industries and look at their journey
• Open Questions in front of us
• Additional Concepts
• How to think in Models (Algorithms)
• Change Management
• Complexity in general and in business
• Complexity, Coupling,
• Systems View

We want to develop a way of thinking about the new age businesses and how both the hard and soft skills
play a vital role in any transformation

WHAT THIS COURSE IS NOT:

• Will not teach you digital technology basics
• Will not teach you business basics ( will assume that you have already covered this in your core courses)
• Will not provide depth in any specific business function but will cover a wide swath of territory
“A B SCHOOL IS A HEALTH CLUB, NOT A TANNING SALON”
ABOUT CASES…GUIDELINES

• Attendance is recommended with full participation to get the best learning……

• Reading the Cases and the course material is recommended. For each case, do the following
• Figure out the central issue in the case and articulate it
• Make a map of all the related functional areas that are impacted OR are influenced.
• Make a sub map of each of those functional areas with issues in those functional areas
• Prioritize the functional areas IF POSSIBLE and REQUIRED
• Look at the Transformation / Change aspect
• Why the company needs to transform?
• Is this the right time to transform?
• Does the company have the necessary assets ( Hard and Soft) to change?
• Has the company changed in the past? (May not be in the case)
• What was the result of the change in the past? (May not be in the case)
• What learnings if at all is the company trying to incorporate into this change, from its past? Should it?
• How is the company trying to drive this change? Change Model? What is its culture?
• Is the transformation strategy adequate? What else would you do?
• Does it have the right leadership to drive this change?
• What will it have to do to sustain this change after it has been accomplished?

• Not all the information may be available in the cases. Do research.

COMPANIES NEED TO CHANGE, BUT……

“If you want an insight into how COMPANY-X does software, let me know, I worked there for a while.
But I’ll need all the questions written in advance, in triplicate, and signed off by both your team leader and
your line manager.
After that, I have an SLA of 12 weeks to reply. Any change request will need to be reviewed at the executive
review, which meets quarterly. “
CHANGE IS THE TOUGHEST THING. PERIOD.
THE INTERCONNECTEDNESS OF GLOBAL RISKS
WE DO NOT FULLY UNDERSTAND THESE DISASTERS……..
COMPLEXITY – COUPLING MATRIX!
Ambiguity and Uncertainty….

Uncertainty comes down over a period, but

ambiguity goes in cycles

Uncertainty is linked to a lack of accurate information and can be

resolved with rational decision making whereas ambiguity is the
product of complexity, which increases the potential choices and can
only be resolved with value-based decision making.
Change Pyramid & benefits of well managed change…..

Where Do you think are the most problems?

Diffusion of change and the revenue curve
WHY IS CHANGE MANAGEMENT CHALLENGING…..
THEORETICAL
Understand change theories, Leadership theories, Organizational culture and thoery, Diffusion of change
BASE

BEHAVIORAL
Understand resistance, motivation, group memberships,resilience
PSYCHOLOGY

PEOPLE
MANAGEMENT Understanding how to manage a group by influence > Trust > Character/Competence

FAILURES/HISTORY Historical perspectives – create context and forestall any quick fixes

NEURO SCIENCE How to make individuals feel valued, what happens neuroscientifically when we are rewarded, scolded, etc

LEARNING FROM
Learning from marketing, agile, dev-ops etc
OTHER AREAS
FAILURE REASONS FROM PSYCHOLOGY AND ANTHROPOLOGY

PREMATURE ”Availability Bias” - we recall information that is available easily – hence we respond to narratives more than
CLOSURE raw data

CONFORMITY Pressure to conform (soloman asch), Milgram prison experiments (authority)

CONFIRMATION People look for data that confirms their conclusion – “wired into us” – we fit data into our existing “mental
BIAS maps”

DIFFICULTY WITH
ABSTRACTION “Anchoring Bias” – We keep working from past anchors – trends will continue “linearly”

OVERCONFIDENCE
AND DEFENCE “Lake Woebegone Effect” – our psyche makes us overly confident of our capabilities
MECHANISMS
INTRODUCE ACCEPTABLE LEVEL OF USEFUL DISAGREEMENT
DEVIL’S ADVOCATE The office of the “promoter fidel” in the catholic church – debates sainthood.
Robert Kennedy was appointed the devils advocate by his bother president Kennedy – cuban missile crisis

MANAGEMENT
RUTS Use of “Foils” at IBM pre Gerstner; Not to defer to an “expert” in any situation but to question

DECIDE, HOW TO
DECIDE Often Overlooked. Need to have the decision making proceses shored up first

HISTORY THAT FITS Using History to create contexts; Stopping premature decisions to be taken; rather than looking at
situational analysis as the starting point, use history to create a context

CONSTRUCT
ALARM SYSTEMS

SECOND CHANGE Persians had 2 meetings – one in a drunk state and the other in a sober state. Dan Ariely calls them “Hot”
MEETINGS and ”cold” state

Wanna Bet on the side, $1000 of MY money and yours that you wont reach that number
BET ON IT Prediction Markets – Open up the forecasting problem to a wider audience both inside and outside
HP uses this for Prineter Sales, Intel
“A system is an interconnected set of elements that is
coherently organized in a way that achieves
something”

• Digestive System
• Football Game
• Sands on the road
• University
• A new apartment block full of strangers
• Old city neighbourhood
University
• Tangible: Building, Classes, Students, Professors,
Support Staff, IT systems, Residences

• Intangible: School Pride, Academic Prowess and Rigor

• Interconnectedness: Standards for admission, the

requirements of degrees, the examination and grades,
budgets and money flows, the gossip, communication of
knowledge

• Purpose: Preserve and Perpetuate knowledge – get god

grades and jobs – get tenure – balance budgets
SIMPLE, COMPLICATED AND COMPLEX SYSTEMS

SIMPLE COMPLICATED COMPLEX

• Determine successful • No Rules

• Well-defined outcome
outcome has been • No certifications
• Rigid set of rules to be
achieved • No pattern can be
followed
• There is a set of steps or followed
• Rules are not robust,
recipes for producing • Scenario plans are
meaning they have to
an acceptable outcome needed
be followed exactly
• Steps are completing • Trial and Error and
• The outcome is
the task are robust, Intuition
completely
• Static • Unknown number of
reproducible
steps
• Static
• Adaptive or Emergent
Making Coffee Accounting Sales Presentations

Source: It’s Complicated

DECISION FRAMEWORK FOR CLASSIFYING A SYSTEM

Success Yes Known Yes Exactness Yes Complicated

Definable? Factors? Required? System

No No No

Complex Complex Simple

System System System

Source: It’s Complicated

Stocks, Flows and Systems Thinking
• Stock: A stock is the present memory of the changing flows within the
system
Stocks take time to change
• Flow: The rate of in or out flow from or to a system
Inflow = Outflow , dynamic equilibrium

• Feedback Loop: close chain of causal connection into a stock that changes
the flow rates based on amount of stock
e.g. Interest coming in to your bank A/C based on principal

“Systems Thinkers see the world as a collection of stocks along with the mechanism for
regulating the levels in the level of stocks by manipulating flows.
They see the world as a collection of “feedback processes”
“Hedgehogs and Foxes”

Hedgehogs – Single Dominant Frame of thinking

Foxes – Multiple Frameworks in their mind

Archilochus (680-645 BCE)

What is a Model

MODELS
• An Abstract representation of
some process, be it a baseball
game, an election campaign,
cooking, hiring, firing, insurance
etc

• Simplifications

• Implicit and Explicit parts

• Blind Spots

• Identify Specific Relationships

• Feedback Loops
Lets Look at a simple everyday Model
Cooking

What goes into cooking?

• Ingredients
EXPLICIT
• Nutritional Value and cost
• Day of the week
• Time of day
• Eating preferences of family
• Individual eating preferences
• Thoughts, Beliefs of the cook OUR CHOICES!
• Education of the cook
• Does the cook work? Stay at home?
IMPLICIT

What is the feedback loop here?

“Essentially, all models are wrong, but some models are useful
-George E. P. Box

Models make us better Thinkers

Models make us Humble

Decision Aids – Better Decisions

“Essentially, all models are wrong, but some models are useful
-George E. P. Box

Moving between Equilibria – Demand Supply model

Scenario Planning – Run multiple times, In real World, once!

Experimental Design (Spectrum Auction Planning)

Institutional Design (Mechanism Design Theory)

Mechanism Design
Inputs Outcome

T X

M
Mechanism

Mechanisms in Prisoners Dilemma

Elective Course Bidding

A Central Godfather

Emotions (Self Regulating Mechanism)

How to Generate Models ?
Identify parts that matter

Identify Specific Relationships

Work Through the Logic

Inductively Explore

Understand Outcome Equilibrium Cycle Random Complex

Identify Logical Boundaries Conditions under which things are true

Communicate
A SIMPLE MARKOV MODEL…(1/2)
Models Dynamic processes ( Disease progression, Who wrote a book?)

Alert (A) Bored (B)

20% of Alert Students become Bored

25% of Bored students become alert

Markov Transition Matrix

A(t) B(t) 1 2 3 4 6
A(t+1) 0.8 0.25 X 1 = 0.8 = 0.69 = 0.63 ~ 0.58
B(t+1) 0.2 0.75 0 0.2 0.31 0.37 0.42

A(t) B(t) 1 2 3 4 6
A(t+1) 0.8 0.25 X 0 = 0.25 = 0.45 = 0.5 ~ 0.58
B(t+1) 0.2 0.75 1 0.75 0.55 0.5 0.42
A SIMPLE MARKOV MODEL …..(2/2)
What is the p that will give me this equilibrium (after we have multiplied the matrix, we would get the same
percentage of people who are Alert and Bored)

A(t) B(t)
A(t+1) 0.8 0.25 X p = p
B(t+1) 0.2 0.75 1-p 1-p

Solving for P gives p = 5/9

Alert (A) 1/9 Bored (B)

20% of Alert Students become Bored

5/9 25% of Bored students become alert 4/9

1/9
How to understand Digital Technology?
Analytics MODELS
• An Abstract representation of
IoT some process, be it a baseball
game, an election campaign,
cooking, hiring, firing, insurance
Block Chain etc
Has allowed us to • Simplifications
Cyber Security Govern via Algorithms
• Implicit and Explicit parts
AR/VR/MR
• Blind Spots

……….. • Identify Specific Relationships

………. • Inductively Explore

A MODEL NEEDS CONSTANT FEEDBACK AND UPDATION TO STAY RELEVANT

Digital Business Model using Business Model Canvas
Thank You!