30 Nov Digital Transformation of Organisations
In 2010 global industrial giant General Electric (GE) embarked on a digital transformation journey under the leadership of CEO Jeff Immelt. The journey failed; stock value dropped dramatically and the CEO was replaced. What challenges did GE face during the transformation? Which factors determined the negative outcome? Which lessons can be learned? The GE case is central to the session of Digital Transformation of Organisations by Dr. Mahdi Ebrahim.
Dr. Mahdi Ebrahim is assistant professor of Digital Innovation and Strategy at Maastricht University. He is also the academic affiliate in digitalisation of Brightlands Institute of Smart Society. Mahdi has a PhD Innovation Management and Strategy from Bocconi University, Milan (It). He is genuinely interested in studying Smart Organisation. Specifically, his topics of interest and teaching are Digital Innovation Management, Digital Transformation, Artificial Intelligence (AI) and the future of Organisations and Smart Pricing (Data-driven price optimisation). He is also a consultant in AI and digitalisation projects in corporations active in finance, telecom, pension, energy and education.
Why digital transformation?
Dr. Ebrahim hits off with why companies (should) care about digital transformation and AI. “By 2035 AI has the potential to boost labour productivity by up to 40%, double annual economic growth rates and boost average profitability by 38%. Digital disruption has created new business models that have changed the music, retail, travel and financial industry forever.” MIT Sloan survey shows 84% of managers (+ 3000 business executives, in 112 countries and 21 industries) believe that AI will allow or sustain a competitive advantage, 75% think AI will allow to move into new business and/or new markets. Nevertheless, less than a quarter of organisations have adopted AI. Why? Mahdi Ebrahim explains that one of the top challenges is that people can’t find immediate business cases for digital technologies and it is difficult to get the right data. Other barriers are: attracting the right AI talent, competing investment priorities, short term versus long term goals and security concerns.”
From industrial giant to digital industrial 4.0 leader
Before diving into the EG case, Dr. Ebrahim explains the concepts of digitisation (digitalising data), digitalisation (optimising single processes and customer experiences) and digital transformation (companywide transformation, based on a new business model). The GE case is about GE’s ambitious objective to transform itself from industrial giant to digital industry 4.0 leader. The case explores how GE looked to future trends and identified digitisation and agile methodologies as a way to reach this ambitious goal. In small groups the students discuss the case on the basis of the five dimensions of the STAR-framework of analysis (Galbraith): strategy, structure, processes, rewards and people. As it turns out, the GE-case offers many relevant lessons from GE mistakes such as: unbalanced portfolio of innovations across 3 time horizons, the lack of a real strategic focus in any area, too many silos, lack of company-wide engagement of top leaders in the digital transformation journey, much focus on P&L rather than long term digital goals and the fact that the company was simply too large to transform all at once.”
Jenny van der Merwe, South African (living in the Netherlands), working for Carrier Global Corporation as Controller Benelux. “I am the financial business process owner for an internal project in the Benelux. Working for a multinational, it was interesting to identify possible pitfalls which create awareness and focus areas that may have been underestimated or overlooked during the digital transformation process. The case is a good learning to keep in mind for our own process. My key takeaway is the use of the Star-model to critically analyse the process in my own organisation.
Digital transformation is always about people
Martijn Bovee, Marketing Director of Louwman Dealer Group is responsible for digital transformation. “Although I would have preferred to discuss other cases as well, the GE case offers many interesting lessons. My main takeaway is that digital transformation starts at the top. Furthermore, it’s vital to involve people – and keep them involved – during the transformation process. Digital transformation is not (just) about the technique, it’s always about people.”
This article displays the student insights and experiences of our On-Campus MBA Digital Staretgy module of the Digital Business elective. Our On-Campus track has an on campus learning format and is part of the executive modular part-time MaastrichtMBA programme. The programme has a Triple Crown accreditation and is aimed for professionals with at least 5 years of working experience.