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Over the four years that we have been studying companies’
digital transformaons, we have found that dierent people
mean dierent things when they refer to a digital transfor-
maon. Currently, some big companies are aempng to
digize, while others are focused on becoming digital; some
are even trying to do both simultaneously. To succeed in the
digital economy, companies need to be both digized and
digital—and there is a big dierence, despite the similarity
of the words. To arculate and execute a digital strategy, it’s
important to understand the requirements for becoming
both digized and digital. This brieng1 tries to clarify what is
involved in each of these two essenal transformaons.
Digizaon involves standardizing business processes. It is
associated with cost cung and operaonal excellence. In
essence, digizaon imposes discipline on business processes
that over the years were executed by individual heroes in a
variety of creave (but not always opmal) ways. SAP, People-
So, and other integrated soware packages that burst onto
the scene in the 1990s helped lead the way to more digizing.
Digizaon was a painful process in the 1990s, and for compa-
nies that have not yet been able to standardize core processes,
it is an ongoing struggle.
The benets of digizaon are signicant: eciency, reliabili-
ty, predictability—in short, operaonal excellence. For all the
pain that it entails, digizaon is an essenal undertaking in
companies. Without digizaon, companies cannot scale;
they cannot absorb the complexity of expanded product
porolios; they cannot personalize services. Disciplined, stan-
dardized business processes, where appropriate, ensure the
accuracy and security of transacons and back oce process-
es. They make data accessible and reliable.
In the ‘90’s and even early 2000’s, business leaders tended to
grossly underesmate the challenge of digizaon. Shedding
habits—imposing discipline—proved to be harder than they
imagined. In many cases, leaders commied to digizaon
iniaves thinking they were funding new and beer tech-
nology. Many didn’t recognize that digizaon requires a
commitment to fundamental changes in how people work.
Consequently, most digizaon eorts have cost more—and
have generated fewer benets—than ancipated.
Technology is an important tool for digizing a company. As
companies discipline business processes, they implement
technologies that automate repeve back oce process-
es and ensure seamless transacon processing. They clean
up master data and architect transacon data to provide
transparency in support of operaons, customer support, and
analycs. These process and technology soluons comprise a
plaorm we refer to as an operaonal backbone.2
Because they are sll in the throes of building and learning to
use their operaonal backbones, many business leaders are
not disnguishing their transformaon to become digized
from the present need to become digital. They are assuming
that to become digital, they must simply use digital technolo-
gies to become more digized. They might set out to improve
operaons by applying Internet of Things (IoT) capabilies or
to enhance customer service with mobile technologies.
But “becoming digital” is a totally dierent exercise from
digizing. Although digizaon is an important enabler of
digital—and digital technologies can certainly support oper-
2 MIT CISR research has found that certain technology resources, including
an operaonal backbone, are key to building organizaonal agility and
innovaveness, as described in J.W. Ross et al, “Designing Digital Organi-
zaons—Summary of Survey Findings,” MIT Sloan CISR Working Paper No.
415, February 2017.
© 2017 MIT Sloan Center for Informaon Systems Research, Ross, Beath, and Sebasan. MIT CISR Research Briengs
are published monthly to update the center's patrons and sponsors on current research projects.
Jeanne W. Ross, Principal Research Scienst
MIT Sloan Center for Informaon Systems Research (CISR)
Cynthia M. Beath, Professor Emeritus
University of Texas, Ausn
Ina M. Sebasan, Research Scienst
MIT Sloan Center for Informaon Systems Research (CISR)
Although digizaon is an important enabler
of digital—and digital technologies can
certainly support operaonal excellence—
all the digizaon in the world won’t on its
own make a business a digital company.
1 This brieng is adapted from Jeanne Ross, “Don’t Confuse Digital With
Digizaon,” MIT Sloan Management Review, September 29, 2017,

2 | MIT CISR Research Brieng, Vol. XVII, No. 10, October 2017
aonal excellence—all the digizaon in the world won’t on
its own make a business a digital company. Becoming digital
involves a very dierent kind of transformaon.
Today, companies are confronng new business opportunies
presented by a host of powerful and potenally game-chang-
ing technologies like social, mobile, analycs, cloud, and the
Internet of Things (SMACIT), as well as cognive compung,
biometrics, and various emerging technologies. The capabil-
ies of these powerful, readily accessible technologies intro-
duce so much speed and connecvity into businesses that
they enable not just an opportunity to improve operaons,
but enrely new value proposions. A digital company inno-
vates to deliver enhanced products, services, and customer
engagement. Because digital emphasizes innovaon and
speed, it involves a dierent kind of transformaon. Unlike
the pain associated with digizaon, a digital transformaon
is more oen excing , thrilling—and a bit unnerving!
The benets of a successful digital transformaon include
growth in revenues and margins, undying customer loyalty,
and the ability to aract top talent (and thus connue to
grow). If they fail to become digital, companies risk their
products becoming commodized as their competors oer
informaon-enriched soluons.
To become digital, leaders must arculate a visionary digital
value proposion. This value proposion conveys how digital
technologies and informaon can enhance the company’s
exisng assets and capabilies to create new customer value.
Being digital is not just introducing mobile apps for custom-
ers. It is taking advantage of the opportunity to redene a
business—and possibly even an industry.
Companies deliver their digital value proposions in the form
of digital oerings. We dene digital oerings as informa-
on-enriched customer soluons delivered as seamless,
personalized customer experiences. Digital oerings are rev-
enue generang. Companies can implement digital oerings
by starng with a small, simple product or service—just like
a digital start-up. Companies maintain a compeve edge
by connuously introducing new features and services that
enhance the value proposion of that oering, while also
developing related oerings.
Digital companies rely on their operaonal backbone to
en sure security reliability and scale of their basic transacon
processing, the eciency of back oce processes, and
ac ce ss to ma ste r d ata . But an operaonal backbone will not
support the requirements for speed and innovaon associ-
ated w it h d i gi tal o eri n gs . Thus, companies embarking on a
digital transformaon need to architect a second plaorm—a
digital oerings plaorm—to provide access to reusable
digital business components. These components will include
both technical capabilies (e.g., aut he n ca on , c on n ec v it y )
and business capabilies (e.g., customer onboarding, perfor-
mance dashboarding) that the company will require when it
creates a new oering.
Successful companies in the digital economy will be both
digital—to provide customer value—and digized—to provide
scale and eciency. Although companies sll struggle to dig-
what that means and how to do it are now well estab-
lished; it’s just hard to do it well. How to be digital, in contrast,
is less well established. We have highlighted the contrasts
between the two types of transformaons in gure 1.
Dening a digital value proposion that oers soluons cus-
tomers are willing to pay for is more art than science. Schnei-
der Electric oers an example of how a company progresses
from digized to digital.
Schneider Electric SE is a 181-year-old €25 billion global
specialist in energy management and automaon. A series
of more than two hundred acquisions between 1999 and
2008 expanded Schneider Electric’s porolio from tradional
electric distribuon and industrial control products to incor-
porate its new focus on high-tech intelligent energy manage-
ment and automaon soluons.
Although these acquisions posioned Schneider Electric
to oer new, digitally enabled value proposions, they also
3 MIT CISR research has found that only 28% of established companies have
a value-adding operaonal backbone. Ibid., 15.
4 Schneider Electric’s digizaon transformaon is described in A. Karuna-
karan, J.G. Mooney, and J.W. Ross, “Accelerang Global Digital Plaorm
Deployment Using the Cloud: A Case Study of Schneider Electric’s ‘bridge
Front Oce’ Program,” MIT Sloan CISR Working Paper No. 399, January
2015. The company’s digital transformaon is the subject of J.W. Ross, C.M.
Beath, and K. Moloney, “Schneider Electric: Connecvity Inspires a Digital
Transformaon,” MIT Sloan CISR Working Paper No. 417, May 2017.
To become digital, leaders must arculate a
visionary digital value proposion that conveys
how digital technologies and informaon can
enhance the company s exisng assets and
capabilies to create new customer value.

MIT CISR Research Brieng, Vol. XVII, No. 10, October 2017 | 3
introduced a great deal of business complexity. Management
felt that the variability and fragmentaon of exisng enter-
prise processes resulted in operaonal ineciencies and
missed revenue opportunies.
To address these concerns, around 2009 Schneider Electric
began to introduce transformaons intended to digize
the company. In parcular, the company installed a cus-
tomer relaonship management (CRM) system to facilitate
cross-selling and provide transparency into customer data.
Also, management led the consolidaon of the hundreds of
ERPs absorbed in the company’s many acquisions to just
twelve. The CRM and ERPs together formed the core of the
company s operaonal backbone. To facilitate adopon and
use of this evolving backbone, Schneider Electric instuted
signicant organizaonal changes, such as a new Informa-
on, Process, and Organizaon funcon that centralized
responsibility for IT and enterprise processes.
Digital Transformaon
By 2016, Schneider Electric had dened a digital vision—“Life
Is On”—that reects the company s commitment to its cus-
tomers’ needs. The company had assigned P&L responsibilies
to forty-eight lines of business, organized into three Businesses
reecng its major customer segments: Buildings and IT (res-
idenal and nonresidenal building managers, including data
centers), Infrastructure (energy ulies), and Industry (indus-
trial rms and original equipment manufacturers).
Schneider Electric’s digital value proposion leverages IoT to
provide enhanced energy management and automaon across
all customers’ equipment and sites. Schneider Electric analyzes
sensor data to provide informaon that customers can use to
manage their own facilies, or that Schneider Electric can use
to support customers from one of its locaons.
To provide these soluons, Schneider Electric is building out
a new plaorm it calls EcoStruxureTM. This plaorm includes
core technical services such as cybersecurity, complex event
processing, identy, and subscripon billing; and business
services like apps and analycs and other requirements for
asset performance management. As the company creates
new oerings, it will be able to reuse these services.
As of late 2016, Schneider Electric was pilong asset perfor-
mance management services with y of its most strategic
customers. But in order to succeed with these new digital
oerings, management realized that the company must again
transform and so set changes in moon: Responsibility for
Schneider Electric’s emerging EcoStruxureTM plaorm was
transferred to the CIO, who also has responsibility for the
company s operaonal backbone. The company created six
business clusters where leaders can debate the relave impor-
tance and potenal value of innovave ideas. To help custom-
ers adopt new digital oerings, Schneider Electric is forming a
centralized sales and services organizaon. And the company
has started engaging customers in co-creaon processes to
idenfy how digital oerings can best meet customer needs.
As established companies posion themselves for success
in the digital economy, they will nd it essenal to be both
digized (i.e., operaonally excellent) and digital (i.e., oer-
ing innovave customer services). If a company has a strong
operaonal backbone, the company's IT unit can help with
development of the digital oerings plaorm and ensure that
this new plaorm integrates as needed with the operaonal
backbone. If the company is sll learning to digize, though,
the IT unit may be consumed with digizaon iniaves. In
this case, a separate business unit can oversee inial experi-
ments around digital oerings to idenfy what services might
be of interest to customers.
Like digital start-ups, companies with a weak operaonal back-
bone can oer new digital services. But if their new oerings
nd a market, these companies will need to quickly implement
key elements of an operaonal backbone to enable scaling up
the new business. They will also need to architect a plaorm
for their new digital oerings, or they will nd that the early
burst of innovaon will stall when they aempt to integrate
services in ways their customers have come to expect.
Figure 1: A Comparison of Digital and Digized
Digized Digital
Benets Operaonal eciency, reliability, and cost
Revenue generaon and growth
Technology Requirement Operaonal backbone (e.g., ERP, CRM,
shared services)
Digital oerings plaorm with reusable technical
and business services for oerings
Transformaon Focus Process discipline; business standardizaon
where needed
Rapid innovaon; introducon of a new value

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