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Chapter 2
Choose the right
transformation “bite
size”
Pick battles big enough to matter and small enough to win.

—Jonathan Kozol

Many companies set their digital and AI transformations up to struggle

from the start by getting the scope of the change wrong. Some companies
start too small, believing an incremental approach will lower risk. This is
a mistake. Successful transformations need to change something mean-
ingful in the business, where there is a noticeable amount of value at
stake and the impact can be measured. You won't get far transforming a
house by repainting the living room; you need to take on something much
more substantial, like remodeling the kitchen.

Others, with the best of intentions, go too big too soon, and try to trans-
form the whole company all at once. This is generally too disruptive, too
expensive to do right, or too difficult to tackle as a first project, and usu-
ally fails. More commonly, companies spread bets and resources too
thinly across an uncoordinated set of activities and initiatives. This re-
sults in a lot of activity but not much value.

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The domain-based approach

The right approach is to identify a few important and self-contained do-

mains in the business and rethink them completely. As many as 80% of
successful interventions in a struggling digital transformation are based
on re-anchoring the scope to drive a concerted effort against a well-de-
fined domain.1 Taking this approach starts with identifying what the do-
mains are. A domain is a subset of your enterprise that encapsulates a co-
hesive set of related activities. There are a few ways to define domains
(see Exhibit 2.1).

Companies can determine for themselves how best to draw a circle

around a set of business activities to define a domain that makes the most
sense. The key is to define a domain that's large enough to be valuable
and noticeable to the company, but small enough to be transformed with-
out being unduly impacted by dependencies with other parts of the busi-
ness. How many total domains are there for a company? The right num-
ber is about 10–15 for a monoline business. For a conglomerate, the right
unit of analysis will be the strategic business unit, so domains are defined
at that level. For the purposes of a digital transformation, however, select
two to five to focus on transforming first. It is possible to go bigger and do
more domains at the beginning. However, doing so requires a significant
near-term investment, more coordination, and more talent. It may also
carry more risk and will almost certainly require significant external re-
sourcing and may deprive the organization of some early learnings. So be
thoughtful about which and how many domains to tackle.

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EXHIBIT 2.1

Prioritizing domains

Prioritizing which domains to go after first requires an assessment along

two broad dimensions: value potential and feasibility (see Exhibit 2.2).
Executives will recognize this simple way of prioritizing opportunities
but they should pay attention to the criteria that drive the assessment.

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EXHIBIT 2.2

At this stage, a high-level estimate of the value potential based on a com-

bination of outside-in analysis and discussions with senior leaders and in-
dustry experts will suffice. Most companies struggle with this kind of esti-
mation because they lack experience understanding what might be possi-
ble with digital. To address this issue, consider using benchmarks from
successful companies (even outside of your sector). Key value considera-
tions include:

1. Customer experience. Improving the customer experience should be

considered the “first among equals” when it comes to considerations.
Most successful digital and AI transformations are centered around
the customer and meeting their needs. It helps to benchmark the cur-
rent experience versus competitors, and project how much the experi-
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ence would improve once the domain is transformed. This should

translate into measures of specific customer satisfaction improvement
as well as of customer growth and improvement in net value per
customer.
2. Financial benefits. At this stage you want to estimate financial bene-
fits by focusing on operational key performance indicators (KPIs), such
as new customer growth, reduction in churn, increased value per cus-
tomer, improvement in process yield, or reduction in cost to serve. It
can be difficult to precisely estimate how much improvement could be
achieved at this stage, so an estimate informed by what others have
achieved in analogous industries will suffice. Be careful not to down-
play the potential at this stage. This is only for prioritization purposes
and it is not yet the business case.
3. Speed to value. A domain-based transformation should typically gen-
erate significant value within six to 36 months, depending on the do-
main. This is often an important consideration in terms of providing
early benefits and helping fund the transformation. We have found
that, in general, AI-intensive opportunities pay off more quickly.
4. Synergy. If you are transforming more than one domain, synergy be-
tween them is a compelling point of leverage. Synergy can be evalu-
ated in terms of three primary elements: (a) data reuse across solu-
tions, (b) tech stack reuse across solutions, and (c) shared change-man-
agement efforts. For example, if you develop a new mortgage sales
platform and a new credit-card sales platform at the same time, you
would only need to retrain your thousands of branch sales representa-
tives once.

Assessing feasibility is a combination of understanding technical and data

readiness, the change-management effort required, and the domain
leadership's capacity to commit. The most important considerations are:

1. Strong executive sponsorship. You need to be clear whether the ex-

ecutives in the given domain are fully on board. A unit may be ripe for
digital transformation, but if there are competing priorities, such as

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implementing a new IT system or completing a major compliance re-

mediation effort, then it might not be the right time to transform it.
2. Data and technology readiness. On the data side, the core questions
to assess are the ease of moving the necessary data fields to the cloud
and the quality of the underlying data. At this stage, a cursory analysis
is needed, but more diligence will be required if this domain is se-
lected. On the tech side, the core questions to assess are quality of the
cloud architecture, the performance of the underlying core systems,
and the ease of accessing data and applications with application pro-
gramming interfaces (APIs). Your enterprise architects will be best po-
sitioned to make this assessment. Note that legacy technology – or the
demands on large existing core systems, such as an ERP upgrade – is
often used as an excuse for not making progress. These issues, of
course, need to be understood, but are not a reason for inaction.
Legacy mindsets are a bigger challenge than legacy technology.
3. Ease of adoption. By understanding the scope, intensity, and risks in-
volved in the change effort, companies can identify potential obstacles
to the adoption of a digital solution. For example, carrying out change
in a unionized environment may involve negotiations that can require
time to carry out effectively.
4. Ease of scaling. Assuming you successfully develop the digital solu-
tion, assess how easy it will be to scale it across the enterprise? How
complex will the change management challenge be? How many differ-
ent data environments will the solution operating in? These questions
matter in getting the full value.

The output of this value-feasibility analysis should highlight two to five

domains to prioritize. What's important at this point is that you are not
looking for precision – it does not matter if the measurements are exactly
right at this point. View this more as a way to structure the conversation
with the management team. Refining estimates will happen in the next
step as part of reimagining the domain.

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In their words: Avoiding fragmentation and collaborating

better

The enemy of any go-to-market digital transformation is fragmenta-

tion, especially in a company of Sanofi's size… . you need to ruth-
lessly prioritize, and recognize that six months down the road, new
shiny objects could creep in to dilute your initial objectives, and slow
down your ability to create big wins.

Today, we invest less in aggregate than we did three years ago, yet
for the chosen priority projects, we devote more resources. Our itera-
tive agile build cycles go faster and involve users in the development
process, resulting in solutions that are much more relevant and
impactful.

A second obstacle to success is us, the leadership, the management

team. Everybody likes to have their sphere of business power, which
in the past was linked to a specific, often siloed, P&L. The digital fu-
ture is not like that. You need to be more open, able to empower, dele-
gate, and collaborate. Nurturing digital capability is another factor.
We had to train up a critical mass of people who could understand
digital in order to attract and retain digital talent. Previously, we
didn't move fast enough and rejected innovative ways of working in-
troduced by the new talent, which led to frustration and rapid churn.

—Dr. Pius S. Hornstein, Global Head, Digital Global Business Units,

Sanofi

In some cases, management will have a clear view of where the value is
and decide to go after that domain immediately, skipping the prioritiza-
tion step (see an example of this in the Freeport-McMoRan case example
in Chapter 33). This can be a good approach when management is clearly
aligned and the value from the domain is meaningful. In practice, this can
also be a useful way to build conviction in the organization by clearly

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demonstrating the value companies can capture or protect with digital

and AI.

One large agricultural company decided to go this route by focusing ini-

tially on its commercial domain by supporting its agronomists in better
serving its growers (customers) and in making it easier for these growers
to do business with the company. The CEO and the top team were experi-
encing competitive pressure from new digital entrants and felt there was
a number of customer pain points they could address quickly to improve
cross-selling and retention.

While jumping quickly to address a trial domain can work well, leader-
ship needs to guard against just launching another pilot that generates in-
terest but doesn't materially transform the business. That's why it is so
important to take the time to conduct a thorough domain reimagination
effort, as described in the next chapter.

Note

1.
1. Tim Fountaine, Brian McCarthy, and Tamim Saleh, “Getting AI to
scale,” Harvard Business Review, May–June 2021,
https://hbr.org/2021/05/getting-ai-to-scale.

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