RESEARCH BRIEFING | VOLUME XIX, NUMBER 10, OCTOBER 2019

DIGITAL SUCCESS REQUIRES

BREAKING OLD RULES
Jeanne W. Ross, Principal Research Scientist
MIT Sloan Center for Information Systems Research (CISR)
Cynthia M. Beath, Professor Emeritus
University of Texas, Austin
Martin Mocker, Research Affiliate
MIT Sloan Center for Information Systems Research (CISR)

In an earlier briefing, we discussed how digital technologies—
social, mobile, analytics, cloud, the Internet of Things, artificial
intelligence, blockchain, and many more—are instigating two
transformations at established companies: one to become digi-
tized, the other to become digital.1 Both digitizing and becoming
digital are essential to sustained business success. And both take
advantage of digital technologies. Beyond that, the two transfor-
mations have more differences than commonalities.
In particular, the platforms that support becoming digitized
and digital are fundamentally different. Digitization relies on
an operational backbone, the foundation for a company’s
enterprise processes and their operational excellence. Digital
relies on a digital platform, the foundation for a company’s
digital offerings and their rapid innovation.
The platforms that support becoming
digitized and digital are fundamentally
different—and companies must deploy
very different rules to manage them.
Not surprisingly, companies must deploy very different “rules
of the road” to manage these two distinct platforms. By
rules of the road we mean the roles, processes, metrics, and
norms that work together to deliver desired outcomes. This
briefing explores the operational backbone and digital plat-
form and discusses the contrasting rules that enable estab-
lished companies to succeed with these platforms.
TWO DISTINCT PLATFORMS FOR TWO
DISTINCT PURPOSES
The operational backbone supports core operations—how a
company delivers goods and services, maintains its books of
record, and completes essential back office processes. When
designed well, the operational backbone enhances profitabil-
ity and customer satisfaction by ensuring reliable, seamless
end-to-end processes through shared data and technology.2
Traditionally, big enterprise systems like ERPs, CRMs, and
core banking engines served as the base technology for the
operational backbone; today, parts of the operational back-
bone may be enabled by software-as-a-service. But it is not
the choice of technology supporting an operational backbone
that defines this platform. Rather, it is the platform's pur-
pose: an effective operational backbone provides stable and
reliable core enterprise processes, such as error-free invoic-
ing, compliant accounting, and seamless logistics processes.
The digital platform, in contrast, enables new digital offer-
ings—think of a mobility solution helping people get from
point A to B, for example, or a healthcare solution helping
patients improve sleep. The digital platform allows a com-
pany to swiftly add and enhance new digital offerings, and
thus targets revenue growth. To fulfill its distinct purpose,
the digital platform is designed as a repository of software
components that can be assembled into digital offerings that
support a new or enhanced customer value proposition. A
digital platform is designed to evolve; the platform will initial-
ly have very few components, but as the company adds more
digital offerings the platform will grow.
In short, the operational backbone and digital platform are
very different: one supports processes, permitting stability
and scalability; the other supports offerings, enabling speed
and innovation. A final big distinction is that companies de-
sign an operational backbone by articulating a desired target
state for their enterprise processes. The digital platform has
no target state; rather, it evolves as a company learns what
technology makes possible and what customers value.

1 J. W. Ross, C. M. Beath, and I. M. Sebastian, “Digitized ≠ Digital,” MIT Sloan 2 J. W. Ross et al, “Designing Digital Organizations—Summary of Survey
CISR Research Briefing, Vol. XVII, No. 10, October 2017. Findings,” MIT Sloan CISR Working Paper No. 415, February 2017.

© 2019 MIT Sloan Center for Information Systems Research, Ross, Beath, and Mocker. MIT CISR Research Briefings are published month-
ly to update the center's patrons and sponsors on current research projects.
2 | MIT CISR Research Briefing, Vol. XIX, No. 10, October 2019
RULES FOR MANAGING AN OPERATIONAL
BACKBONE
Ever since companies started digitizing by implementing ERPs
and CRMs, business and technology leaders have struggled to
implement standardized processes and data definitions. Their
goal: make business processes reliable and efficient. Com-
panies have learned that success depends on senior leaders
making clear operating model decisions.3 Then, senior-level
process owners can dictate process and data standards and
oversee their adoption. Individual business units, regions, or
functional departments are expected to sacrifice local discre-
tion as necessary in order to optimize enterprise processes.
To keep an operational backbone stable and scalable, leaders
must stave off non-value-adding variability in how the com-
pany executes core operations. Accordingly, investments in
new processes are well suited to being planned and evaluat-
ed using traditional business case processes. Metrics tracking
the value of these investments target cost savings, customer
satisfaction, and various measures of reliability.
New digital technologies are helping companies to improve
and automate more of their core processes—thus raising the
bar for operational excellence. Digital technologies, however,
are not changing the fundamental role of the operational
backbone or the rules for managing it.
RULES FOR MANAGING A DIGITAL
PLATFORM
The goal of the digital platform is to facilitate the creation of
digital offerings. Key to doing so is assigning clear account-
ability for offerings and the components comprising them.
The people at the top of the company own responsibility for
defining a digital vision, but they do not know exactly what op-
portunities will excite customers. Senior leaders must rely on
empowered teams to shape and deliver new customer value
propositions—and to develop and use the digital platform.
As a result, top-down decision making, reliance on traditional
business case evaluation processes, metrics focused on cost
cutting or near-term profitability, and other traditional man-
agement practices impede digital transformation. People re-
sponsible for digital innovation who must prepare traditional
business cases to justify their efforts will face perpetual
frustration. So will people who are expected to sell new digi-
tal offerings but are evaluated based on traditional quarterly
sales goals. People asked to identify and launch new digital
3 An operating model defines a company’s desired level of business pro-
cess integration and standardization. See J. W. Ross, P. Weill, and D. C.
Robertson, Enterprise Architecture as Strategy: Creating a Foundation for
Business Execution, Harvard Business School Press, 2006.
offerings without the autonomy and the resources required
will simply take their talents elsewhere.
Daniel Langdon, Director of the Digital eXperience Lab at
Principal International Chile (PI Chile—a subsidiary of the
Principal Financial Group), described the organizational
changes required for digital this way4:
Everything from how you sit, where you sit, how you
collaborate, where you collaborate, what your timeta-
bles are, what your perks are, what your organizational
structure is, what your career is going to be, etc. In all
of those dimensions, we are changing radically.
At most companies, such radical changes in how decisions
are made and work gets done are proving uncomfortable for
people at every organizational level.
MANAGING TWO VERY DIFFERENT
RULE SETS
If you want to digitize and become digital—and we would
argue that, in the long run, you have no choice—you’ll need
to address the challenge of managing two different sets of
rules. There are three things you can do to get started:
1. Separate teams working on digital from teams working on
digitization.
2. Allow digital leaders to experiment with new rules by
breaking old ones.
3. Identify and coach new leaders.
Separate Digital Teams from Digitization Teams
One way to simultaneously manage for digitization and digi-
tal—and their respective platforms—is to clearly distinguish
responsibilities for each. Companies like Schneider Electric,
Royal Philips, and Toyota have all taken this approach. At PI
Chile in 2018, the operational backbone was managed by the
CIO while the digital platform was the responsibility of the
Chief Digital Officer.
Funding of responsibilities for the two platforms is also
distinct. People responsible for digitization can better pursue
operational excellence when the operational backbone
receives consistent investment, year after year, at the en-
terprise level. CIOs and process leaders can then define and
address enterprise priorities. People responsible for digital
innovation receive funding for short-term experiments that is
easily increased or discontinued based on the results of early
4 M. Mocker and C. M. Beath, “The First Year of Digital Transformation at
Principal International Chile,” MIT Sloan CISR Working Paper No. 432,
December 2018.
 MIT CISR Research Briefing, Vol. XIX, No. 10, October 2019 | 3

experiments. Early in a digital transformation, companies will
need to specify a budget for digital experiments, but success-
ful digital offerings can eventually “earn” their budget.
Because established companies must sustain their business
success, they should initially put only a handful to a few
dozen (not hundreds) of people on the task of experimenting
with new digital offerings.
Allow Digital Leaders to Experiment
with New Rules
We know of no company that feels it has nailed the challenge
of developing new rules for digital teams. We do know that
people within companies that are experiencing some success
are breaking old rules and devising new ones. They “cheat” on
performance evaluations of salespeople, to preserve commis-
sions; they subvert traditional budget processes, to secure
needed resources; they ignore conventional price lists, to ex-
periment with value propositions; they circumvent established
customer relationship management approaches, to co-create
offerings; they ravage time-honored product development
methods, to apply agile, iterative development approaches.
At PI Chile, the people in the DXLab who were developing
their digital platform and new offerings were mostly per-
manent employees instead of contractors; they used agile
methods and a continuous product management approach
instead of running time-definite projects and handing over
responsibility; they were equipped with powerful laptops
and giant screens instead of the standard desktop computer
package. They also could choose to advance via either a new
technical career path or the existing managerial one.
What makes all this rule breaking manageable is that it is
contained initially to a small part of the business—the part
that is experimenting with new sources of revenues. In any
company, digital leaders will need the support and under-
standing of senior leaders.
Identify and Coach New Leaders
Not all people who have successfully led traditional business-
es are well-suited to digital business leadership. The idea
of breaking rules to identify what works may feel terribly
unnerving for some— even when they have been encouraged
to experiment. For some, there will be a fear of failure or an
inability to function in such an uncertain environment. Others
may believe very strongly in the rightness of the old rules.
Digital leaders strive to identify what needs to be done to
help empowered teams achieve their goals. Langdon of PI
Chile describes a digital leader’s new role at the company
as clarifying and enabling each team’s mission rather than
specifying and controlling detailed tasks:
What we say now is, “This is your domain, this is your
playground, and this what you need to get done.” We
just build the right culture, build the right team, enable
them, delegate the decision making, and trust the peo-
ple. And if they have friction, we resolve that friction!
Resolving friction is the way I see my role.
Few companies already have leaders or team members who
are comfortable crafting new rules. The others need to use
coaching to develop these capabilities in leaders and teams
or to hire new talent for their digital units. But companies
like PI Chile, CarMax, Philips, DBS Bank, and Northwestern
Mutual are finding they have lots of people on board who
are anxious and able to make the shift.
START BREAKING RULES NOW!
As your company recognizes the need for two complementary
yet connected platforms, you will also recognize that what
made your company successful in the past will not make it suc-
cessful in the future. The rules for digital success are not clear.
Start now to break a few rules and experiment with new ones.

Figure 1: Two Different Platforms for Two Different Transformations

Operational Backbone (Digitize) Digital Platform (Digital)

Purpose Support stable, scalable, and reliable core
enterprise processes
Target State Support of a target operating model
(desired level of process integration/
standardization)
Typical success metrics Operational excellence-related (e.g., cost
savings, customer satisfaction, reliability)
Key senior leader responsibility Make operating model decision; process
owners dictate standards and oversee
adoption
Enable swift innovation and enhancement
of new digital offerings
No target state; evolves with insight about
customer value of digital offerings
Innovation-related (e.g., revenue growth)
Empower and coach teams to identify and
deliver digital offerings that advance a
digital vision
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