IT Strategy

Assignment

Digital Masters
By
Nishant Dey Purkayastha
PGP/18/153

Table of Contents

1. Who/What are Digital Masters?....................................1

2. Four Levels of Digital Mastery......................................2
3. How to Become a Digital Master?.................................4
3.1 Framing the Digital Challenge..................................4
3.2 Focusing Investment................................................4
3.3 Mobilizing the Organization......................................5
3.4 Sustaining the Digital Transformation......................6
4. Digital Mastery at Microsoft..........................................7
5. Digital Mastery at Infosys...........................................10
6. Conclusion..................................................................12

1. Who/What are Digital Masters?

Digital Masters are companies that use digital technologies to drive significantly higher levels of
profit, productivity and performance.
As per research, digital Masters generate 9 percent more revenue with their existing physical
capacity and drive more efficiency in their existing products and processes. Also, masters are 26
percent more profitable than their average industry competitors.
To succeed in digital transformation, CIOs and other business leaders must throw out the old IT
cost center management style and instead, they must focus on using digital technologies and new
operational processes and infrastructures to improve the customer experience, handle governance
and more.
Digital mastery is a combination of two separate but related dimensions .The first, digital
capabilities, is investment in technology-enabled initiatives to change how the company operates.
Firms maturing in the second dimension, leadership capabilities, are creating the right conditions
to drive digital transformation throughout the organization. Leadership capabilities include the
vision to shape a new future, governance and engagement to steer the course, and IT/business
relationships to implement technology based change.

2. Four Levels of Digital Mastery

Digital

Masters

represent

excellence on both digital and

leadership

dimensions.

Beginners are just at the start of

the digital journey. As a result,
Beginners

have

only

basic

digital capabilities. And they lag

behind their competitors on
multiple measure of financial
performance. Fashionistas are
not waiting to act. They buy every new digital bauble. However, because they lack strong digital
leadership and governance, they waste much of what they spend. Or they find that they need to
reverse what they've done so that they can integrate and scale their capabilities. Although
Conservatives have useful digital leadership capabilities, excess prudence prevents these firms
from building strong digital capabilities. This caution can be useful, but it can also create a
governance trap that focuses more on controls and rules than making progress. By focusing on
control and certainty, Conservatives find it hard to mobilize top management and the rest of the
organization to see the bigger prize that digital transformation can bring. Digital Masters have
overcome the difficulties that challenge their competitors. They know how and where to invest,
and their leaders are committed to guiding the company powerfully into the digital future. They
are already exploiting their digital advantage to build superior competitive positions in their
industries.

Digital transformation is moving more rapidly in some industries than in others. Companies in the
travel and music industries were hit early by threats from digital competition, and have already
undergone profound transformation, but still have more challenges to face. Industries such as
financial services and retail underwent major transformation due to electronic commerce in the
2000s, and are now starting to innovate with technologies such as social media, mobility and
analytics. Other industries, however, have yet to be hit hard by fast-changing technologies.

3. How to Become a Digital Master?

The road to digital mastery can be broken down into four broad stages, with each stage having a
set of well-defined objectives and a list of activities that need to be undertaken in order to achieve
those objectives.

3.1Framing the Digital Challenge

BUILD AWARENESS

Ensure that the top leaders understand the need for digital

Increase understanding of the potential threats and opportunities of digital?

DEFINE THE STARTING POINT

Determine which strategic assets will help the company excel

Understand how mature are the companys digital competencies

CREATE A SHARED VISION

Ensure that the companys top leadership been aligned around a vision of the companys
digital future

3.2Focusing Investment
TRANSLATE THE VISION INTO ACTION

Convert the vision into strategic goals

Translate the digital priorities into a roadmap of digital activities

4

BUILD THE GOVERNANCE

Design governance mechanisms to steer the digital transformation

Use strong digital governance to keep the company on track

FUND THE TRANSFORMATION

Work out the funding mechanisms of the transformation

Design a balanced portfolio of digital investments

3.3 Mobilizing the Organization

SIGNAL THE AMBITIONS

Market clearly the ambitions and benefits of digital

Explain to the employees how digital will benefit them on a day-to-day basis

ENGAGE THE EMPLOYEES

Build momentum with the employees by co-creating solutions and involve those who will
be making the change happen

SET NEW BEHAVIORS AND EVOLVE CULTURE

Use digital technologies to encourage culture shift

Use the digital transformation to break operational paradoxes of the past

5

3.4 Sustaining the Digital Transformation

BUILD FOUNDATION SKILLS

Have a well-structured digital platform

Develop strong IT business relationships

Have a digital competence growth roadmap

ALIGN INCENTIVES AND REWARDS

Align incentives, rewards and recognitions to the objectives

MEASURE, MONITOR AND ITERATE

Develop a management process to measure and monitor the progress of transformation

Adapt the course as needed

4. Digital Mastery at Microsoft

Microsoft (Microcomputer Software) was founded in 1975 to enable people and businesses
throughout the world to realize their full potential by creating technology that transforms the way
people work, play, and communicate. From 1975 to 2010, PC sales grew strongly with a CAGR of
25% YoY. Microsoft successfully captured up to 95% of this growth. Its two major cash cows are
the Windows Platform (client and server), and the Office business productivity suite which
created a de facto industry standard because of associated network externalities.
Most of Software Editors adopted the Microsofts business model of licensed software: customer
bought the right to use the software on a per user basis (infamous End User License), or per
computer basis while the code itself remained the property of the software vendor. It was a
lucrative business model, with windows platform trapped customers due to high switching costs.
First big disruptor in that legacy business model, was the Open Source business model where
software was provided for free. The launch of Appli iPhone and Googles Android further
challenged Microsoft. Microsoft was losing its relevancy in the consumer IT space. Worse,
developers are getting away from the Microsoft platform which was de facto losing value for endconsumers.
It was not a single technological disruption which did harm to the Microsoft legacy business
model, but the emergence of a new ecosystem which leveraged innovation in devices (Moores
7

law for electronic components density, i.e. miniaturization) and friendly user interfaces, mobile
internet performance improvements (2G, 3G and 4G), Moores law and economy of scale through
deployment of giant datacenters (hundreds of thousands servers), ultimately giving birth to new
business models.
Anticipating the impact of the consumerization of IT, Microsoft decided to move its focus more on
the consumers side and to modify its business model from selling software to renting software.
This digital transformation of an unprecedented magnitude started slowly and accelerated as
Microsofts organization was walking its learning curve. Microsoft started to build cloud
services out of its legacy server products.
In the same time, Microsofts organization itself evolves from what might be seen as a cooperative
of software editors, known as Product Groups competing against each other to a more functional
organization which allows better resource utilization than a divisional organization: engineering
teams could produce piece of software in a genuine platform approach, i.e. components/artifacts
which could be used in different products. Ultimately the objective was componentization of
products.
The organization also evolved from a HR perspective. Microsoft gave-up its infamous Stack
Ranking performance review. Product Groups also embrace agile development methodology for
continuous delivery. This has been possible, because the incentive framework itself shifted from
individual mercenary style incentive, to more team-wide incentive: you fail as a team, and win as a
team. The collaboration and cross team communication culture also evolved at Microsoft
leveraging available tools as they were developed. Embracing agile development patterns for
continuous delivery, Microsoft is leveraging the telemetry it has embedded within its code (to

accurately monitor and manage cloud services consumption and behavior against workloads) to
make its solutions evolve. Microsofts CEO pretty well understood that Microsoft did not need to
own the devices to enlarge its cloud services usage, but that Microsoft could leverage its
competitors network externalities (IOS + Android ubiquity) to push client applications to these
end user devices which will consume Microsofts cloud services.
Consumerization of IT (i.e. usages developed in the mass consumer space instill in the enterprise
space) and Commoditization of IT (i.e. users want the innovation to be generalized quickly and
for almost free as an outcome of the Moores law) are the megatrends shaping the business model
and technical evolution of Microsoft and its competitors. This is the reason why it all started in the
consumer space, and now it is instilled in the Enterprise Customers space in which software
vendors, cloud service providers try to adapt their consumers oriented solutions.
Microsoft as being once a web 1.0 company and being now almost a full web 2.0 company, both
from a technological and business model perspective, is in the unique position through its
Enterprise Services to assist its Enterprise Customers in that difficult and uncertain digital
transformation, because Microsoft has just walked its way through. This is a profound
transformation while it is somehow led by fast pace technology evolution, it is first of all mostly
an organizational and a cultural evolution.
Being forced to execute its own digital transformation has been mandatory for Microsoft in its
attempt to stay relevant in its own industry. It is transforming its business model, its organization,
its culture to adapt to fast pace changes in its business environment (competitors, consumer,
megatrends). It gained legitimacy through its own digital transformation execution. However,
while these changes might have been positive leading to a more agile corporation, there is still

a lot of work to do to achieve this transformation. Microsoft transitioned from a high margin &
low volume to a low margin & high volume positioning. As Microsofts revenue generation
pattern is changing, its cost structure needs to change too. Its previously product oriented sales
force need to be retro fit into cloud solution oriented sales force.

5. Digital Mastery at Infosys

Digital transformation is not only expected to be at the core of all future business activities, but
Infosys is also actively embracing the topic, and placing it at the front and center of its go to
market approach. Infosys plans not only to create value from digitization for its clients, but will at
the same time undergo a transformation itself and become a digital master.
This management has identified several aspects:

Renew its existing service and solution offerings (e.g. through automation, innovation and
operational excellence),

Further build out its IP-based assets (e.g. Finacle and Edge Suite),

Drive innovation initiatives through design-thinking, co-creation and strategic partnerships,

Build out a strong corporate culture based on learning, talent and engagement, e.g. through
talent management and co-innovation initiatives with external institutions.

10

This is, to a certain extent, a continuation of the existing vision for the company. The timeline to
achieve this is ambitious: Infosys plans to have its internal transformation completed by summer
2016.
As well as this internal turnaround, Infosys is enhancing its digital transformation offering for
clients. To this end, it has established dedicated focus and investments for digital transformation
capabilities.
Prior to this step, the services offered within the Infosys Digital group focused primarily on
customer experience topics, but now they will increasingly also address the enterprise core and its
digital ecosystem. Infosys positions itself as a holistic partner across all areas, with the aim to
become the 'new age integrator' of services, partnerships, products, platforms and operations.
In this context, there is also an approach to bridging the divide between the CMO and the CIO.
There is a growing need for collaboration and joint decision-making between marketing and IT
departments.
Infosys is moving in the right direction to become a key partner for its clients in the future digital
space. It is clearly neither the first nor the only service provider adopting this position, but it
certainly has the capabilities, scale and momentum to play in the digital transformation space.
Time will tell if they can become one of the leaders. For now, there is work left to do to stem the
flow of the internal challenges before they can aggressively gain market share. Moreover, Infosys
has to build out its brand awareness and continue to deliver business results - and innovation - for
their clients.

11

6. Conclusion
Digital transformation will continue to transform the way customers view and interact with
enterprises. Customers have higher expectations for level of service, access to information and
product quality regardless of the line of business or channel. Today, customers expect enterprises
to be fully aware of their needs and be smarter in their interactions. Companies find it difficult to
navigate disruption. Even when they embrace the shift, it is difficult to change. They are often
rooted to their status quo by existing processes, organizational structures, and investments.
Leading organizations take every customer touch-point as an opportunity to influence, engage, and
transact with the customer, while laggards remain internally focused on legacy solutions and
measures.

12