Transforming the organization to reap the benefits promised by advanced digital technologies is no longer a question of “if” or “when”; it’s a question of “how.” Business leaders are often counseled by expert advisers to set up a dedicated digital unit that “disrupts,” driving change from the top that is executed on a grand scale.
That approach isn’t right for all companies, but there’s another way to successfully tackle this major change. Our research into digital transformation in industrial companies shows that the best approach in many cases is not revolutionary but evolutionary. We suggest that, depending on circumstances, that may be the better approach for organizations in other sectors as well.
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Take the case of Italian electric utility Enel, which serves about 70 million customers worldwide. It was the first utility to bring smart meters into people’s homes in 2001, and it pioneered many digital enhancements to the user experience through the 2000s. In 2017, it started a digital plant project, harnessing the latest sensor and automation technologies to improve the efficiency of electricity generation and distribution. It created a digital twin of the electricity network and brought in virtual reality and augmented reality to train field service technicians. Alongside these changes, the company moved its IT infrastructure to the cloud and pushed responsibility for IT operations out to 13 digital hubs. It trained employees across the company in digital technology, put in place a crowdsourcing innovation platform, and introduced so-called agile working practices. Enel is now one of the most digitally advanced utilities in the world, but there was no big-bang revolution. Rather, the transformation was managed in an integrated and incremental way, through initiatives put in place by executives working across all the different parts of the organization.
Enel’s evolutionary approach contrasts markedly with the large-scale transformations attempted in some industrial companies.
1. In addition to these front-line digital initiatives, most large companies have digital projects underway aimed at transforming back-office and support activities to make them more efficient. Due to space constraints, our focus in this article is on customer-facing initiatives.
2. C. Linz, G. Müller-Stewens, and A. Zimmermann, “Radical Business Model Transformation: How Leading Organizations Have Successfully Adapted to Disruption,” 2nd ed. (London: Kogan Page, 2021).
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4. “CloudCheckr Is the Engine Driving Cloud Governance at Siemens,” PDF file (Rochester, New York: CloudCheckr, accessed May 21, 2021), https://click.cloudcheckr.com.
5. “The GE Journey: Culture and Talent Accelerate GE’s Transformation From Industrial Conglomerate to Digital Services Provider,” Capgemini Research Institute, accessed Nov. 18, 2021, www.capgemini.com.