In the fall of 1985, David Cook founded Blockbuster, which would later emerge as a home for not just video/DVD movie rentals but also as a social space for local movie buffs to meet and socialize. Within the next few years, backed by its success, Blockbuster expanded its operations internationally and became a popular household name. Soon after, Viacom acquired Blockbuster and took it public in 1999. At its peak, Blockbuster had over 9000 stores worldwide and boasted a revenue of USD 5.9 million [1]. Buoyed by the momentum and consumer demand, Blockbuster cemented its position and business model and leveraged its almost monopolized market advantage to penalize loyal consumers for late returns; this is evidenced by the fact that, in the year 2000, roughly 16% of Blockbuster’s revenue came from late fees. By the turn of the century, with the exponential growth of technology, customer preferences and demands were evolving rapidly. Rather than walking into a physical store to rent DVDs, consumers fancied the idea of browsing DVDs on the web and having them delivered to their doorsteps at a palatable subscription fee minus the late fee that Blockbuster was infamous for. Capitalizing on digital disruption and changing customer demands, several new players emerged in the video rental space, such as Netflix and RedBox, offering newer channels such as DVD-by-mail and online streaming services. Despite the shift in consumer demand, digital disruption, and mounting competition, Blockbuster did little to change its strategy and refused to adapt to changing market trends. Ironically, in the year 2000, Blockbuster turned down an offer to acquire Netflix for USD 50 million, which subsequently led to Blockbuster filing for bankruptcy within the decade [2].

The primary factors attributed to the downfall of Blockbuster are the following:

• Failure to embrace the digital disruption: Blockbuster was comfortable with the existing business model and failed to recognize the shift in industry trends and customer needs and preferences, leading them to dismiss the potential of online rentals and streaming services, which ultimately disrupted the traditional brick-and-mortar video rental model. The company was too slow to adapt to the emerging trends such as online subscription and streaming services, whereas competitors such as Netflix were already capitalizing on digital technologies to offer convenience and accessibility to consumers, causing a dent in Blockbuster’s market share.
• Failure to create customer value: Blockbuster misplaced its focus on topline revenue rather than creating consumer value. The company failed to generate consumer value while heavily relying on maximizing profits and revenue by charging loyal customers late fees. It also failed to assess the significant consumer value that could be generated by adopting modern digital trends. Competitors such as Netflix offered greater convenience, broader content libraries, personalized recommendations, and subscription models that resonated with consumers. Blockbuster struggled to match the offerings and value propositions offered by its competitors.
• Poor strategic decisions: Blockbuster made several strategic missteps that further exacerbated its decline. For instance, the company passed on an opportunity to acquire Netflix in its early stages, underestimating the potential of the emerging business model. Blockbuster also pursued late-entry initiatives such as DVD kiosks and online streaming, but these efforts failed to regain lost ground.

There have been several technological innovations that transformed the world forever, from the invention of paper to penicillin and electricity. However, the inventions of the last century, such as airplanes (1903), television (1927), VCRs (1965), personal computers (1971), cellular phones (1973), the internet (1983), the World Wide Web (1989), portable GPS (1990), Google Search (1997), Facebook (2004), YouTube (2005), the iPhone (2007), and Android (2008), have democratized technology advancements to the masses.

Another technological advancement that is fundamentally altering the way businesses innovate is artificial intelligence (AI). In 1950, Alan Turing, in his seminal paper titled Computing Machinery and Intelligence, opened with a thought-provoking question, “Can machines think?” [3]. Since then, AI has undergone rapid evolution and has matured into a disruptive technology that is having a profound impact on almost every industry. AI is powering creative applications, including autonomous vehicles, robotic surgery, fraud detection, and generative AI that creates new art, to name a few.

If we map these disruptive technologies against the time it took for them to penetrate the market, technological advancements in recent times, such as personal computers, the internet, mobiles, social media, and digital payments, only needed a quarter of the time to permeate the market compared to the innovations of previous generations [4]. In fact, modern technology disruptions are only growing exponentially, forcing enterprises across industries to keep up or lag behind [5]. It is important to note that the modern technology innovations of the digital era (highlighted area in the chart below) have exponentially penetrated the world market:

Figure 1.1 – Technological innovations and the time taken to penetrate the world market

Let’s compare two revolutionary technological advancements - the automobile and mobile phones. The invention of the automobile disrupted the way we travel, and the invention of mobile phones transformed not just how people communicate but also how modern-day businesses are conducted. Since its invention in the late 19th century, it took the automobile industry over six decades to penetrate the market and become established, versus the advent of mobile phones, which only took a decade. Modern-day technologies evolve at a rapid pace, and it is crucial for organizations to stay relevant.

For mobile device manufacturers, it wasn’t easy to stay abreast of the fast-paced technological advancements and the exponential disruption in communication technology at the turn of every decade: analog cellular (1G), digital cellular (2G), mobile broadband (3G), native IP networks (4G), and new radio (5G); traditional providers, such as Nokia and Motorola, who once commanded significant market share, were phased out by new entrants such as Samsung and Apple [6].

Many long-standing enterprises find it difficult to generate organic growth, with younger companies outperforming established players. To put this in context, the average tenure of an S&P 500 company has been declining as the speed of digital disruption is accelerating [7]. In the late 1970s, the average age of an S&P 500 was 35 years, and this number is predicted to further decline to just 12 years by 2027.

Organizations that have stood the test of time amidst digital disruption have adopted strategies that evolve continuously to help them withstand more fluid or uncertain market times. It doesn’t take much for a new entrant or a startup to come up with an idea that disrupts an entire industry. Let’s look at a few companies that veered off traditional methods and revolutionized their respective industries:

• Airbnb, founded in 2008, is one of the largest accommodation platforms that disrupted the hospitality industry. While traditional hospitality companies owned, maintained, and operated properties, Airbnb revolutionized the tourism industry by serving as an online marketplace for short-term homestays and holiday experiences.
• Uber, founded in 2009, is the largest ride-sharing company that disrupted the car rental and leasing industry. While traditional car rental companies owned and leased cars to customers, Uber changed the dynamic by offering ride-shares through just a mobile app.
• Netflix, founded in 1997, started as a DVD rental business and is now the largest streaming platform that has transformed the way consumers rent and watch movies and TV shows. While Netflix does produce its own movies and TV shows, it primarily leases movies and TV shows that can be streamed on its platform.
• Amazon, founded in 1994 as an online marketplace for books, is the largest online retailer by simply serving as a marketplace platform connecting buyers and sellers, revolutionizing the retail industry, whereas traditional retailers have to own and operate a physical brick-and-mortar store and manage inventory. Since then, Amazon transformed itself into a conglomerate and expanded into several industries.
• Spotify, founded in 2006, is the largest music streaming service but doesn’t own any music. Instead, it licenses music from record labels and lets subscribers stream it for a fee.
• Robinhood, founded in 2013, disrupted the financial services industry by offering commission-free trades of stocks and exchange-traded funds and cryptocurrencies, which was never thought possible before. Robinhood democratized trading through a simple mobile app.
• Teladoc, founded in 2002, is one of the largest telehealth companies that disrupted the healthcare industry by leveraging mobile technology to connect patients and doctors virtually anytime outside of a healthcare facility. Unlike traditional healthcare providers, Teladoc doesn’t employ doctors or have its healthcare facilities.
• Pillpack, founded in 2013, disrupted the pharmaceutical industry that was traditionally dominated by retail players that operated in a physical space, filling prescriptions for patients. Pillpack ideated and implemented the concept of consolidating multiple pill prescriptions and delivering it to customers’ doorsteps.
• Chime, founded in 2012, is a challenger bank that offers banking services exclusively through online and mobile, disrupting the banking industry by offering fee-free banking, early paydays, no fee, and no credit check credit cards, forcing traditional players to respond.
• Rent the Runway, founded in 2009, is a clothing rental company that disrupted the designer clothing industry by allowing customers to rent, subscribe, or buy designer clothes through their online platform. This business model addressed a major consumer concern of overspending and having to own apparel such as event garments, wedding dresses, and ski apparel, which are infrequently used.

One commonality across all these companies is that business disruption is almost always led by modern digital technology. Let us explore how enterprises can innovate and move up the digital frontier.

Contrary to the belief that innovation happens in a siloed, vacuum environment, it is actually a systemic and continual process. Innovation requires not only the generation of new ideas but also the implementation and sustained adoption of those ideas. This often involves overcoming significant barriers and challenges, such as resistance to change, regulatory hurdles, or technical limitations. It also requires a systematic approach to identifying and addressing customer needs, understanding market trends, and leveraging available resources and expertise.

Leaders must strive to create a culture and a systematic approach to a culture of innovation. An innovation continuum is critical for enterprises to thrive and grow in today’s competitive landscape. The process of innovation is a set of strategic steps where an organization can take creative approaches to realize its vision, goals, and objectives within a timeline [8]. The following diagram illustrates the stages of the innovation continuum:

Figure 1.2 – The innovation continuum

Let’s take a look at each of the stages shown in the preceding diagram:

1. Ideation: This is the initial stage of the innovation process, where new ideas are sourced and generated through brainstorming, market research, customer feedback, or other sources. The goal is to identify potential areas for innovation and generate a variety of ideas that can be explored further.
2. Curation: Once a promising idea has been identified, the next step is to curate and develop a concept around the ideas that can be tested and ratified. This can involve the following:
   • Stakeholder surveys (internal or external) to identify problem areas in different forms
   • Explore and identify solutions that are available both internally and commercially
   • Identify the stakeholders of the product in consideration
   • Build out MVPs (minimum viable product) prototypes or a proof-of-concept
   • Determine the viability of the idea across multiple dimensions, such as financial, technological, legal, and security dimensions, and its measurable potential impact

   Ideas that pass curation move onto the prioritization phase, and the ones that don’t are moved to the back burner.

3. Prioritization: This is an important step where curated ideas get prioritized based on a variety of factors, including customer or market demands, technology, competitive intel, and applicability to core business capability vs. exploratory considerations. Some popular methods that enterprises can leverage are McKinsey’s three horizons model, a portfolio of initiatives, a strategic control map, and a consumer decision journey [9]. Each of these methods caters to different kinds of prioritization factors that influence decision-making.
4. Solution hypothesis: At this stage, the concept is tested and evaluated to determine its feasibility, usability, and market potential. This can involve assessing product viability, business value, opportunity cost, customer or stakeholder value, and return on investment.
5. Incubation and development: Once the concept is deemed feasible and viable, the next step is to develop and implement the technology incrementally. This may involve further building out the MVP, designing the product, building the software, securing sponsorship, leadership oversight, and funding, and developing the infrastructure needed to support the innovation.
6. Integrate, launch, and scale: Once the technology has been developed, the next step is to integrate, launch, and scale to reach a wider audience. This may involve marketing and promotion, building partnerships, incremental releases, or expanding the product’s capabilities to meet the evolving needs of the market.

As every enterprise is unique, leaders in enterprises can choose the appropriate innovation strategy that best fits their vision and objectives. However, it is crucial to create a culture of innovation and put in place a process that drives it. Several modern enterprises have created and funded R&D departments and innovation labs with a primary focus on industry research, technology research, and viability assessment. Leadership sponsorship is key to ensuring innovation centers do not operate in a silo and are embedded into the organizational structure. Let us explore the tales of two enterprises and how leadership played a crucial role in leading the digital disruption and the need to constantly innovate.

In 1880, George Eastman, in partnership with Henry A. Strong, founded the Eastman Dry Plate Company with the purpose of selling dry plates for cameras. Within the decade, the company introduced a new film roll process, filed multiple patents, and revolutionized the photography industry by democratizing photographic film products to virtually everyone. By 1888, the company introduced a portable box camera that came with a film roll of 100 exposures, and in 1892, what would eventually become a common household name (Kodak), then known as the Eastman Kodak Company was born.

For much of the 20th century, Kodak dominated the photographic industry and became one of the world’s leading manufacturers of photographic film and cameras. In the early years, Kodak expanded rapidly and was able to keep competitors at bay via a combination of innovation, acquisitions, and exclusive contracts. The company was able to successfully navigate the great depression, both World War I and II, and expanded into producing cameras and films for the movie industry, cameras for surveillance satellites, and NASA space missions. From the 1930s until the 1970s, Kodak reigned supreme and enjoyed a monopoly in the photographic films and cameras business. The company’s business model remained unchanged, with R&D focused solely on photographic films and cameras, as the company enjoyed an enviable market share.

In 1934, 6,000 miles across the planet, from the land of the rising sun, a photography and imaging company was established with the objective of producing photographic films. The company entered a market that was already dominated by Kodak in the US. However, Fujifilm enjoyed a supreme market position in camera films in Japan. During the same period when Kodak was still reigning supreme, holding its grip primarily focused on photographic films and cameras, Fujifilm started diversifying, producing films for photography, motion pictures, and X-rays, and after World War II, it further diversified into medical technology in fields such as X-ray diagnosis, electronic imaging, and magnetic materials.

In the 1980s, Fujifilm entered the US market with lower-priced film and photographic supplies, threatening Kodak’s position in the market. Soon enough, Fujifilm made strong headways and took significant market share from Kodak by opening manufacturing plants in the US, employing strategies such as aggressive marketing and price cuts. This started a price war and started eating into Kodak’s profits, reducing shareholder value. This was exacerbated by Fujifilm winning the bid for the official film of the 1984 Olympics in Los Angeles, giving the company a strong foothold in the world market. This period also saw Fujilfim innovating continuously in other markets. For instance, the invention of computed radiography (CR) revolutionized the medical equipment industry and solved major challenges regarding increased radiation exposure to both technicians and patients, which was conventionally attributed to traditional radiography.

By the dawn of the 21st century, the new millennium witnessed the exponential growth of digital technology. Demand for digital cameras caused a swift decline in photographic films, requiring a change in strategy to cater to new market demands. In the early 2000s, Fujifilm also faced increasing competition from modern digital photographic companies.

In response to this challenge, Fujifilm focused on business transformation and embarked on a digital transformation journey. The company invested heavily in new technologies, such as digital imaging and healthcare, and began to diversify its product portfolio. Under the leadership of Shigetaka Komori (2003–2021), Fujifilm underwent a bold structural reform and strategically acquired companies in chemical, healthcare, and electronics to diversify and complement Fujifilm’s business model. He was instrumental in overseeing Fujifilm through the decline of the photo film industry and transforming it into a healthcare, medical, and office equipment maker. Under Komori’s leadership, the company looked at the fields to which its expertise in chemical technology could be adapted and started acquiring companies that would complement its business. They moved into digital X-rays and endoscopes, gaining a 70% world market share of tac film, an essential component of all LCD screens. Another area the company pursued was cosmetics, and it launched an anti-aging skincare line in 2007, which helped expand Fujifilm cosmetics worldwide. As a result of these efforts, Fujifilm has been able to successfully transition to the digital age and maintain its position as a leading global conglomerate.

Kodak’s response to the digital challenge of the 21st century was quite different. With Antonio M. Perez at the helm, Kodak, in 2005, began outsourcing development and manufacturing, which were originally done in-house, and divesting its digital camera manufacturing and operations. By 2007, Kodak succumbed to competitive pressures, exited the film camera market entirely, and started investing heavily in a potential high-margin printer ink business. This was a departure from the razor and blades business model that was a cornerstone of Kodak’s business strategy. However, Kodak eventually exited the inkjet market owing to pressures from dominant players such as Hewlett-Packard. Kodak was removed from the S&P 500 in 2010 and, with declining profits, ultimately filed for bankruptcy in 2012. Since the bankruptcy, Kodak has been trying to diversify into other markets, such as pharmaceutical materials and digital printing products and services, with mixed outcomes.

To understand how deep Kodak’s denial of the upcoming digital disruption was, in the 1980s, Kodak conducted extensive research on technology advancements and the potential of digital photography to take over film technology. The results showed that digital technology was poised to disrupt Kodak’s bread-and-butter film business. The good news was that the change would be gradual, giving Kodak the opportunity to adapt and transition. Kodak did little to prepare for this despite the results of the study. To put this into perspective, under the leadership of George Eastman, Kodak took the technology disruptions head on: first, when they let go of the lucrative dry-plate business to move to film roll technology, and second, when they adopted color photo films despite having a dominant position with black and white film technology [10].

In perspective, Kodak’s failure can be attributed to its oversight of capitalizing on the digital disruption opportunity, its over-reliance on brand marketing, banking on acquisitions for expansion into newer territories, and, more importantly, the failure to embrace an innovation continuum for several decades at the turn of the century, at a time when it was most needed. On the contrary, Fujifilm capitalized on the digital revolution opportunity and continued innovating ahead of the market and diversifying into other markets where its chemical expertise was complimentary, leading the digital transformation [11].

The primary factors in Fujifilm’s successful digital transformation were the following:

• Innovation continuum: Fujifilm had a long history of research and development, and it continued to invest heavily in new technologies. This unwavering focus on innovation allowed Fujifilm to stay ahead of the competition, gain market share in new territories, and develop new products and services that met the needs of its customers.
• Visionary leadership: Fujifilm has been led by a strong and visionary leadership team that has been able to guide the company through the digital transformation process.
• Employee engagement: Fujifilm has been able to successfully engage its employees in the digital transformation process. This has been achieved through a number of initiatives, such as employee training and development programs and employee feedback mechanisms.
• Customer focus: Fujifilm’s unwavering focus on customers has been a key factor in its success in the digital transformation process. The company has been able to understand the needs of its customers and develop products and services that meet those needs.
• Financial resources: Fujifilm leveraged its financial resources to invest in the digital transformation process. This has allowed the company to invest in new technologies, hire top talent, and develop new products and services.
• A commitment to sustainability: Fujifilm has a long history of environmental stewardship, and it has continued to invest in sustainable technologies and practices. This commitment to sustainability has helped Fujifilm to reduce its environmental impact and improve its bottom line.

In the next section, we will investigate how enterprises can lead digital transformation.

Leadership is the cornerstone and an indispensable element for a successful digital transformation within any organization. Whether the aim is to perform incremental digitization, enter new markets, or launch new products, leadership involvement is quintessential. Leading digital transformation involves creating a vision for how technology can be leveraged to drive innovation, improve efficiency, and enhance customer experiences. Good leaders empower their teams to break through roadblocks, paint the big picture, and keep the teams strategically aligned toward organizational growth, value creation, and competitiveness. Using modern technology as an instrument for business growth continues to be the foundation of every enterprise’s business strategy. However, the evolution of modern technology is exponential, and enterprises need to stay nimble and agile in order to adapt and execute a successful digital transformation.

Cloud technology has become a synonymous term for digital in enterprise digital transformation. According to the KPMG technology survey, 80% of organizations said their cloud-enabled transformations have been successful [12]. However, only one-third realized substantial return on investment (ROI) from their cloud investments. Cloud was positioned as a driver toward enterprise IT cost savings, but two-thirds of organizations still couldn’t realize a substantial ROI, which is counterintuitive.

Figure 1.3 – The enterprise digital transformation pillars

Let’s explore the core pillars and the key constituents in leading and executing a successful digital transformation of an enterprise:

• Vision and strategy: A well-defined strategy and vision serve as foundational guiding principles for digital transformation. They provide a sense of purpose, ensure alignment, foster stakeholder engagement, enable adaptability, and facilitate the measurement of progress. By establishing a strong strategy and vision, organizations can drive their digital transformation efforts with clarity, focus, and purpose, increasing the likelihood of achieving their desired outcomes. A lack of strategy and vision is one of the most common reasons why digital transformation initiatives fail. As with any large transformative initiative, it takes a village to march towards the North Star. Leadership, will, and mindset are crucial to the success of any digital transformation initiative. It is imperative for leaders who are responsible for digital transformation to establish a clear vision, lay out a strategic roadmap, secure partnerships across business stakeholders, and, more importantly, ensure the vision is clearly communicated to everyone within the organization. Without a clear understanding of what the organization wants to achieve with digital transformation and how it plans to get there, teams end up working on siloed objectives instead of working towards the larger objective, resulting in fractured digital transformation.

  Lack of strategy and vision in a digital transformation can be a huge challenge for enterprises seeking to leverage technology to drive organic growth, improve efficiency, and stay competitive. Digital transformation is not just about implementing modern technologies; it also requires a clear strategy and vision from leaders on how these technologies will be integrated within an enterprise to achieve specific business goals. There are several reasons why enterprises may lack a clear strategy and vision when embarking on a digital transformation journey, including a lack of time or resources to develop a comprehensive plan, a lack of consensus among senior leaders about the organization’s strategy, and a lack of will to undertake digital transformation. Irrespective of this, a lack of strategy and vision can have a devastating impact on an organization’s digital transformation efforts, leading to wasted time, money, and resources, derailing the entire transformation effort.

  Some of the key constituents in defining a strategy and vision for a digital transformation are the following:

  • Clarity of purpose: Clarity of vision and strategy provides a clear direction and purpose for a successful digital transformation. They define the goals, objectives, and desired outcomes of the digital transformation journey. A well-defined strategy and vision help align stakeholders and employees around a common understanding of why the transformation is necessary and what it aims to achieve.
  • Alignment of efforts: Having a clear digital strategy ensures that all initiatives and activities related to digital transformation are aligned with the overall strategic objectives of the organization. They guide decision-making, resource allocation, and priority-setting, enabling a co-ordinated and cohesive approach. This alignment maximizes the impact of digital initiatives and avoids fragmentation or conflicting efforts.
  • Future orientation: Defining a digital strategy enables enterprises to focus on the future state of the organization and its desired position in the digital landscape by taking into account emerging technologies, market trends, and customer expectations to drive innovation and prepare the organization for long-term success. By envisioning the future, organizations can proactively shape their digital transformation efforts and stay ahead of the competition.
  • Stakeholder engagement: Digital leaders must engage stakeholders across the organization to create a shared understanding of the digital transformation journey. This helps provide a compelling narrative that inspires and motivates employees, customers, partners, and investors. Clear communication of the strategy and vision fosters trust, encourages participation, and generates support and commitment from stakeholders.
  • Focus and prioritization: Digital transformation often involves a multitude of opportunities as well as challenges. Having a clear strategy and vision enables organizations to prioritize initiatives and investments based on their alignment with the overall objectives. More importantly it helps in filtering out distractions, avoiding the shiny object syndrome, and ensuring that resources are directed towards the most impactful digital initiatives.
  • Manage resistance to change: Digital transformation often requires significant changes in terms of processes, technologies, and organizational culture. A well-defined digital strategy provides a framework for change management, guiding the organization through the transition. It helps communicate the rationale for change, manage resistance, and create a sense of urgency and purpose among employees.
  • Adaptability and agility: A digital strategy framework must strive to provide a strategic roadmap while allowing for flexibility and adaptability by setting overarching goals while also leaving room for experimentation, learning, and adjustment along the way. This agility enables organizations to respond to market dynamics, emerging technologies, and customer needs, ensuring digital transformation remains relevant and effective.
  • Basis for measurement: As the saying goes, “If you cannot measure it”, you cannot improve it; a well-defined digital strategy provides a basis for measuring the progress and success of digital transformation. Establishing Key Performance Indicators (KPIs) and milestones helps track the effectiveness and impact of digital initiatives and data-driven decision-making, as well as promote accountability and transparency and demonstrate value. Regular evaluation that is compared to the strategy and vision allows organizations to correct their course, celebrate successes, and identify areas for improvement.
• Business–IT alignment: The success of an organization’s digital transformation hinges on the ability of leadership to effectively integrate its business strategy and goals with its IT capabilities and resources. The lack of alignment between business and IT is a common problem in many organizations and can lead to siloed thinking, duplication of effort, missed opportunities, inefficient processes, resistance to change, and a reduction in an organization’s business agility. Digital transformation requires a clear alignment between business objectives and IT capabilities. When business and IT strategies are aligned, it ensures that technology investments and initiatives directly contribute to achieving the organization’s goals and helps prioritize IT initiatives that have the greatest impact on business outcomes, improving overall strategic decision-making.

  The following are the key constituents enterprise leaders must facilitate to ensure business-IT alignment:

  • Collaboration and communication: It is quintessential for IT and business to communicate and collaborate to achieve the larger enterprise vision. Business–IT alignment fosters effective collaboration and communication between business and IT stakeholders. It breaks down silos and encourages cross-functional teamwork, enabling a shared understanding of goals, requirements, and challenges. This collaboration enhances the overall project delivery and fosters a culture of innovation and continuous improvement.
  • Seamless integration: Digital transformation often involves implementing new technologies, systems, and processes across the organization. Business–IT alignment ensures a smooth integration of these digital solutions into the existing business infrastructure and, more importantly, allows for efficient collaboration between business stakeholders and IT teams, minimizing disruptions and maximizing the benefits of technology implementation.
  • Business agility: Alignment between business and IT enables organizations to be more agile and responsive to changing market conditions and customer needs. When IT teams understand the business priorities and can quickly adapt technology solutions to support evolving requirements, the organization can capitalize on new opportunities and address challenges more effectively.
  • Customer experience: Customer centricity is a fundamental aspect of any digital transformation. Business–IT alignment helps organizations better understand customer expectations and enables the development and implementation of digital solutions that enhance the overall customer experience. By aligning IT capabilities with business goals, organizations can leverage technology to deliver personalized, seamless, and value-added experiences to their customers.
  • Efficient resource allocation: Business–IT alignment ensures that technology investments are aligned with business priorities and objectives. It helps to optimize resource allocation, ensuring that IT investments are focused on initiatives that have the highest impact on business performance. This prevents unnecessary spending on technology projects that do not align with the organization’s strategic goals. For example, it prevents IT teams from developing solutions that do not align with business needs or business teams from investing in point solutions or technologies that are not aligned with the company’s strategic goals.
  • Effective change management: Digital transformation often requires significant changes in business processes, roles, and workflows. Business–IT alignment facilitates effective change management by ensuring that business stakeholders are engaged and involved in the digital transformation journey. When both business and IT teams work together, it promotes a shared understanding of the transformation goals and helps to address resistance to change.
  • Innovation and competitive advantage: Business–IT alignment fosters a collaborative environment where innovation can thrive. It encourages the exploration and adoption of emerging technologies that can give the organization a competitive edge. By aligning business and IT strategies, organizations can identify innovative opportunities and leverage technology to drive differentiation and create new business models.
  • Scalability and future readiness: Digital transformation is an ongoing journey, and organizations need to be prepared for future changes and advancements in technology. Business–IT alignment ensures that technology decisions are made with scalability and future readiness in mind. It enables organizations to adapt and evolve their technology infrastructure to meet future demands and capitalize on emerging opportunities.
  • Stakeholder satisfaction: When business and IT teams work together cohesively, it improves stakeholder satisfaction. Customers, employees, and other stakeholders benefit from seamless digital experiences, efficient processes, and innovative solutions. Business–IT alignment helps with meeting and exceeding expectations, resulting in higher satisfaction and loyalty.
  • Capitalize on opportunities: A lack of alignment between business and IT can result in missed opportunities. For example, if a business team is not aware of the latest technological advances, it may miss an opportunity to leverage these technologies to improve its operations or gain a competitive advantage, and IT teams may overlook opportunities that can offer a significant business edge.
  • Risk mitigation and security: Digital transformation brings new risks and challenges, such as cybersecurity threats and data privacy concerns. Business–IT alignment ensures that security and risk management are integrated into the digital transformation initiatives from the outset. By aligning business requirements with IT security measures, organizations can proactively mitigate risks and protect valuable assets.

  Overall, business–IT alignment is critical for digital transformation because it enables organizations to effectively leverage technology to achieve their strategic objectives. It promotes collaboration, agility, customer centricity, efficient resource allocation, and innovation, ultimately leading to improved business performance and a competitive advantage in the digital age. This may involve establishing cross-functional teams, developing shared goals and metrics, and investing in training and development to improve understanding between business and IT.

• Customer focus: Digital transformation is an ongoing journey and provides an opportunity for businesses to innovate and create new value for customers. Adaptability and responsiveness to customer needs are crucial to maintaining relevancy and staying ahead of the competition. However, without a customer focus, businesses may prioritize internal efficiency or technology-driven initiatives that are not targeted toward customer-driven innovation. This can limit the ability to identify and seize opportunities for disruptive or transformative solutions that truly address customer pain points and deliver meaningful value. Digital transformation that lacks customer focus can have several negative consequences, including missed customer expectations, a loss of competitive edge, disconnected customer experiences, and negative brand perception. The following are some key areas enterprises must focus on to ensure organizational digital initiatives are customer-centric:
  • Meeting customer demands: Digital transformation is driven by changing customer expectations and behaviors. Customers today expect seamless and personalized experiences across multiple channels, faster response times, and easy access to information and services. By putting the customer at the center of digital transformation efforts, businesses can better meet these expectations and enhance customer satisfaction.
  • Customer experience: Digital transformation provides opportunities to optimize and improve the customer experience. By leveraging digital technologies, companies can streamline processes, automate tasks, and provide self-service options, resulting in faster and more efficient interactions with customers. A customer-focused approach ensures that digital initiatives are designed with the end-user in mind, leading to a more intuitive and enjoyable customer experience.
  • Customer loyalty and retention: A customer-centric digital transformation strategy helps build customer loyalty and encourages repeat business. By understanding customer needs, preferences, and pain points, businesses can tailor their digital offerings and experiences to create value for customers. This leads to increased customer satisfaction, loyalty, and advocacy, ultimately driving higher customer retention rates.
  • Competitive edge: In today’s digital landscape, customer experience has become a key differentiator among competitors. By prioritizing customer focus in digital transformation efforts, businesses can gain a competitive edge. By delivering superior digital experiences, companies can attract new customers, retain existing ones, and differentiate themselves in the market.
  • Driving innovation and agility: A customer-centric approach in digital transformation encourages innovation and agility. By actively seeking customer feedback and leveraging data and insights, businesses can identify new opportunities, develop innovative products and services, and quickly adapt to changing customer needs and market dynamics.
  • New revenue streams: A customer-focused digital transformation strategy can help businesses identify new revenue streams. By understanding customer needs and preferences, businesses can uncover opportunities to develop and offer additional products, services, or experiences that meet those needs. This opens up avenues for revenue growth and expansion into new markets.
  • Mitigate the threat of business disruption: By prioritizing customer focus, businesses can mitigate the risk of losing customers to disruptive competitors. Understanding customer preferences and anticipating their future needs allows companies to proactively innovate and adapt their digital strategies. By embracing digital transformation and providing customer-centric experiences, businesses can safeguard against disruption and maintain a competitive advantage.
  • Employee engagement: Customer focus extends beyond external interactions; it also includes fostering a customer-centric culture internally. When employees understand the importance of customer satisfaction and feel empowered to contribute to improving the customer experience, they become more engaged and motivated. Engaged employees are more likely to deliver exceptional customer service and contribute to the success of digital transformation initiatives.

  Unwavering customer focus is an essential ingredient in driving digital transformation, as it helps enterprises align their efforts with customer expectations, enhance consumer experiences, drive loyalty, gain a competitive edge, foster innovation, and make data-driven decisions. By putting the customer at the center of digital transformation initiatives, enterprises can create sustainable business success in the digital era.

• Organizational culture: As Henry Ford famously said, “Vision without execution is just hallucination.” Enterprise digital transformation is a journey, and visionary leaders need to build the right organization with the right culture and mindset to get it right. Leadership plays a crucial role in driving and sustaining an innovative culture. Leaders need to demonstrate their commitment to innovation through actions and should actively support and participate in innovation initiatives, allocate resources, and provide a safe environment for experimentation and risk-taking. Leadership support sets the tone for the entire organization and sends a powerful message about the importance of innovation.

  Creating a culture of innovation requires a supportive environment that encourages and nurtures creative thinking, experimentation, and continuous improvement. While the specific structure can vary depending on the organization’s size, industry, and goals, here are some key elements to consider when building an organization for a culture of innovation:

  • Foster a learning mindset: Cultivating a mindset where employees are encouraged to continuously learn, explore, and seek new ideas or opportunities is essential to organizational growth. Leaders must ensure access to learning and development opportunities, both internally and externally, to help employees develop the skills and knowledge needed for innovation, enable a blameless culture, and encourage employees to take calculated risks.
  • Cross-functional collaboration: Breaking down silos and promoting cross-functional collaboration is crucial for a successful digital transformation, as it fosters the cross-pollination of best practices and lessons learned from earlier initiatives without having to reinvent the wheel and also prevents resource wastage. Encouraging employees from different departments and backgrounds to collaborate, share ideas, and work together on innovation projects, establishing mechanisms for seamless communication and knowledge-sharing, such as innovation workshops, showcase days, brainstorming sessions, and digital collaboration tools, will ensure an agile organization.
  • Empower and involve employees: Empowering employees with the autonomy to explore new ideas, make decisions, and experiment with different approaches can accelerate innovation within an enterprise. Involving employees in decision-making processes, soliciting inputs, and creating channels for sharing ideas and suggestions, thus recognizing and rewarding employees for their innovative contributions, will reinforce the value an organization has placed on innovation.
  • Resources and support: Allocate resources, both financial and non-financial, to support innovation initiatives. This includes providing dedicated time, budgets, and access to the tools and technologies necessary for innovation. Create an infrastructure that supports innovation, such as innovation labs, prototyping facilities, or collaborative spaces where employees can collaborate, experiment, and test new ideas.
  • Encourage external engagement: Fostering connections with external partners, such as leaders in technology, startups, universities, or industry experts, will help broaden a team’s perspective and understand market trends. External engagements such as collaborating on innovation projects, participating in industry events, and engaging in knowledge exchange promote fresh perspectives, access to new ideas and technologies, and opportunities for the cross-pollination of knowledge.
  • Feedback loop: Implementing feedback loops and mechanisms for collecting and acting upon ideas and suggestions from employees can create a culture where employees feel comfortable sharing their thoughts and feedback and contributing to the innovation process. Leaders must strive to regularly evaluate and respond to employee feedback to demonstrate that their input is valued and taken seriously.
  • Continuous improvement: Building a culture of innovation should be construed as an ongoing process within the organization, where approaches, strategies, and initiatives are continuously assessed and refined. Soliciting feedback from employees and stakeholders helps identify areas for improvement and encourages a mindset of continuous improvement and adaptability as you strive to create a thriving culture of innovation.
• Measure everything: Measuring the progress and impact of digital transformation is essential to assess the effectiveness of initiatives and ensure they are aligned with larger organizational goals. The inability to measure the impact and progress of digital transformation initiatives can have several downsides, including a lack of visibility into any effectiveness, the inability to identify bottlenecks, diluted accountability, and missed opportunities and lessons. While digital transformation can be complex and multifaceted, here are some approaches commonly used to measure digital transformation:
  • Digital maturity assessments: Often, the first step in a digital transformation strategy is to assess the current state of the enterprise across multiple dimensions, including organizational maturity, digital adoption rates, customer metrics, and IT maturity. Conducting assessments periodically helps enterprise leaders evaluate the organization’s current digital capabilities, compare them to industry benchmarks and the competitive landscape, and provide an opportunity to improve incrementally. We will discuss maturity assessments in more detail in Chapter 8.
  • Digital adoption rates: Although we have explored the importance of Business and IT alignment, equally critical is the measurement of the level of user adoption and usage of digital technologies. Measuring adoption rates will ensure that IT organizations don’t chase the next shiny object or spend time on innovations that can lead to tech debt. This can include tracking metrics such as the number of active users on digital platforms, the percentage of employees trained in digital skills, and the utilization rates of digital tools and systems.
  • Customer experience metrics: Every digital transformation effort must put the user right and center. For instance, the objective and key results (OKRs) must be defined according to critical user journey (CUJ) outcomes that can be measured qualitatively and quantitatively. Assessing the impact of digital transformation on customer experience provides a great insight into the effectiveness of the initiative. This can include monitoring metrics such as customer satisfaction scores, net promoter score (NPS), customer feedback and reviews, customer retention rates, and customer lifetime value.
  • Employee engagement and enablement: For successful digital transformation initiatives, leaders must ensure teams are involved and are committed to the objective, as employee engagement is critical. Measuring the level of employee engagement and their ability to embrace digital transformation provides leadership insights into skill gaps and the motivations of the teams. This can be assessed through surveys, feedback sessions, and metrics such as employee satisfaction scores, employee retention rates, employee contributions to thought leadership, and participation in digital upskilling programs.
  • Innovation and agility metrics: Assessing an organization’s ability to innovate and adapt to changes in the digital landscape is an essential performance indicator of an organization’s business agility. This can involve metrics such as the number of new digital initiatives or projects launched, the time taken to bring new digital products or services to market, the success rate of digital innovation initiatives, and the level of agility in responding to market trends and customer needs.
  • Financial performance: Monitoring financial indicators to gauge the impact of initiatives can serve as a powerful tool to sustain and embark on the continuous journey of digital transformation. This can also help stakeholders with clear insights into how budgets are spent, yielding value. This can include metrics such as revenue growth, profitability, ROI from digital initiatives, and total cost of ownership (TCO) savings from process optimization or automation. Mature organizations will often tie in financial value metrics for every digital transformation initiative.
• Environmental, social, and governance (ESG): ESG considerations are increasingly becoming critical in the context of digital transformation. Enterprise leaders play a vital role in shaping and guiding digital transformation efforts to ensure that digital transformation is pursued in a responsible, inclusive, and sustainable manner, taking into account environmental impact, social implications, ethical governance, stakeholder expectations, risk management, and long-term value creation. By integrating ESG principles into digital transformation strategies, organizations can drive positive change, mitigate risks, and enhance their overall impact on society and the environment. Let’s explore some considerations for enterprises as it pertains to responsible digital innovation. However, we will delve into how ESG impacts enterprise innovation in greater detail in Chapter 11.
  • Environmental sustainability: Digital transformation can have both positive and negative environmental impacts. On the positive side, it offers opportunities for organizations to leverage modern digital technologies to optimize resource consumption, reduce energy usage, and promote sustainable practices. However, digital transformation also brings challenges such as increased electronic waste, energy consumption (by data centers), and carbon emissions. Incorporating ESG principles into the core of digital transformation ensures that initiatives prioritize environmental sustainability by minimizing negative impacts and maximizing positive contributions.
  • Social impact and inclusion: Digital transformation has the potential to drive positive social impact by promoting inclusivity, accessibility, and equality. ESG considerations ensure that digital transformation initiatives address social challenges and contribute to societal well-being. For example, organizations can leverage technology to enhance access to education, healthcare, and financial services for underserved communities. ESG also encourages ethical considerations such as data privacy, security, and the responsible use of emerging technologies, such as artificial intelligence, to avoid bias and discrimination.
  • Ethical governance and accountability: ESG principles emphasize the importance of ethical governance and accountability in digital transformation. Organizations need to establish robust governance frameworks to ensure the responsible use of technology, protect stakeholders’ data privacy, and mitigate the risks associated with emerging technologies. ESG provides a lens to assess the governance practices, transparency, and accountability of organizations in their digital transformation efforts.
  • Long-term value creation: Digital transformation is not just about short-term gains; it should focus on creating long-term value for all stakeholders. ESG considerations provide a framework to evaluate the broader impacts of digital transformation beyond financial metrics. By considering environmental and social aspects alongside governance, organizations can align their digital transformation initiatives with sustainable business practices and generate long-term value that goes beyond immediate financial returns.
  • Stakeholder expectations and reputation: Stakeholders, including customers, employees, investors, and regulators, increasingly expect organizations to demonstrate commitment to ESG principles. Failure to address ESG considerations in digital transformation can result in reputational damage, impact on consumer brands, and regulatory scrutiny. Embracing ESG principles as part of digital transformation efforts helps build trust and loyalty among stakeholders, enhancing the organization’s reputation and long-term sustainability.
  • Investor and financial considerations: ESG has gained significant attention from investors and financial institutions, and many investors now prioritize companies that demonstrate strong ESG performance and consider it a key factor in their investment decisions. Incorporating ESG principles into digital transformation can enhance the organization’s appeal to investors, attract sustainable investment, and improve access to capital.
  • Regulatory compliance: ESG considerations are increasingly embedded in regulatory frameworks. Governments and regulatory bodies worldwide are implementing stricter regulations related to environmental impact, data privacy, cybersecurity, and the ethical use of technology. By integrating ESG principles into digital transformation, organizations can ensure compliance with existing and upcoming regulations, reducing legal and reputational risks.
  • Reputation and brand equity: Organizations that prioritize ESG in their digital transformation efforts can enhance their reputation and build strong brand equity. They are viewed as responsible corporate citizens, committed to environmental stewardship, social impact, and ethical practices. This positive reputation can enhance customer loyalty, attract new customers, and differentiate the organization from competitors in a crowded marketplace.

In this chapter, we explored how having a strong vision acts as a foundational element for a successful digital transformation within enterprises.

As was evident from the Blockbuster case study, fostering innovation within the organization and enabling business agility through technology is extremely crucial to thrive and become sustainable in the competitive digital landscape. It is also important for organizations to define and implement an inclusive process of digital transformation and an innovation continuum to ensure continuous improvement.

We also discussed the various aspects of how enterprises can lead digital transformation, such as setting the strategy and vision, ensuring business–IT alignment, unwavering customer centricity, cultivating a culture of innovation, measure everything, and focus on sustainability. We also explored the leadership, will, and mindset of two enterprises with very similar business models, Kodak and Fujifilm, and how Fujifilm evolved into a multinational conglomerate that is still going strong even after almost nine decades.

In the next chapter, we will explore the various cloud paradigms and how enterprises can leverage cloud technology as a vehicle to lead and drive digital transformation.

The references used in this chapter as well as some additional resources are listed as follows:

1. https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/?sh=3ccdbf711d64
2. https://en.wikipedia.org/wiki/Blockbuster_(retailer)
3. https://redirect.cs.umbc.edu/courses/471/papers/turing.pdf
4. Lead and Disrupt, How to solve the innovator’s dilemma - by Charles A. O’Reily III and Michael L. Tushman
5. Representative data collected from the following sources:
   • https://www.insiderintelligence.com/content/proximity-mobile-pay-on-rise-worldwide
   • https://ourworldindata.org/rise-of-social-media
   • https://www.statista.com/outlook/dmo/ecommerce/worldwide#users
6. https://www.visualcapitalist.com/cp/how-mobile-phone-market-has-evolved-since-1993/
7. https://www.mckinsey.com/~/media/McKinsey/Industries/Electric%20Power%20and%20Natural%20Gas/Our%20Insights/Traditional%20company%20new%20businesses%20The%20pairing%20that%20can%20ensure%20an%20incumbents%20survival/Traditional-company-new-businesses-VF.pdf
8. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/enduring-ideas-the-three-horizons-of-growth
9. https://hbr.org/2017/09/what-your-innovation-process-should-look-like
10. https://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/?sh=780e309d6f27
11. https://d3.harvard.edu/platform-rctom/submission/fujifilm-surviving-the-digital-revolution-in-photography-through-diversification-into-cosmetics/#:~:text=%5B2%5D%20Fujifilm%2C%20on%20the,%2C%20you%20heard%20right%2C%20cosmetics
12. https://advisory.kpmg.us/content/dam/advisory/en/pdfs/2023/digital-core.pdf