Digital Operations and Supply Chain Transformation

Indian Institute of Management, Kozhikode

Globalizing Indian Thought

Business Leadership
Class of 2024

Group Assignment:
“How Does Digital Transformation Happen - The Mastercard Case”

Prepared By Group - 4

Prabhat Suman (BL/04/031)

Rewati Bulusu (BL/04/039)
1) If you are a consultant, how would you analyse the case. Is it
transformation?
Analysing the Mastercard case as a digital transformation consultant involves a
multi-faceted approach, addressing various aspects such as people and culture
transformation, risk management, strategy, network effects, ecosystem development,
differentiation, and competition mapping. Here's breakdown of our analysis:

1. Transformation of People and Culture

 What: Mastercard underwent a cultural shift focusing on innovation and

adaptability.
 Why: To transition from a traditional payment processor to a digital innovator
and compete in the rapidly evolving financial services sector.
 How: Initiatives like Mastercard Labs fostered an environment of creativity
and experimentation.
 When: This cultural shift gained momentum under CEO Ajay Banga’s
leadership from 2010.
 For Whom: Beneficial for Mastercard to stay relevant and competitive; also
advantageous for customers seeking modern, digital solutions.

2. Risk Management and Strategy

 What: Diversification into digital services and partnerships to mitigate risks

associated with traditional card-based payments.
 Why: To reduce dependency on traditional revenue streams and to leverage
emerging digital opportunities.
 How: Acquiring companies like Vocalink and collaborating with various
industries.
 When: Strategic shifts became prominent in the early 2010s.
 For Whom: Aimed at securing Mastercard’s future and offering enhanced
services to its customers.

3. Network Effects and Multi-Sided Networks

 What: Leveraging network effects by expanding into digital and mobile

payments.
 Why: To benefit from the increased value as more users (both merchants and
consumers) join the network.
 How: Through initiatives like contactless payments in urban transportation
and partnerships with diverse sectors.
 For Whom: This approach benefits all network participants by offering
convenient payment solutions and creating new business opportunities.

4. Ecosystem Development

 What: Building a comprehensive digital payment ecosystem.

  Why: To create a self-sustaining network of partners and services that feed
into Mastercard’s growth.
 How: By forming strategic partnerships and adapting to local market needs.
 For Whom: Aimed at merchants, consumers, and various industry partner.

5. Point of Differentiation

 What: Differentiating through a focus on digital innovation and non-card

payments.
 Why: To stand out in a competitive market dominated by card transactions.
 How: By developing unique solutions like Smart Stickers and contactless urban
transport payments.
 For Whom: To attract customers seeking advanced, secure, and convenient
payment options.

6. Competition Mapping and Other Factors

 What: Analyzing and adapting to the competitive landscape.

 Why: To identify gaps and opportunities in the market that Mastercard can
exploit.
 How: By shifting focus from direct competitors like Visa to addressing the
broader market of cash transactions.
 For Whom: Ensuring Mastercard remains a competitive and innovative player
in the global payment industry.

This transformation has enabled Mastercard to not just survive but thrive in the
rapidly evolving digital economy.

2) Which opportunities are the right ones? Which do we cut to make room
for more promising projects? How can we best take the decision?
Should we move into being a digital services provider or remain a
payments company, and how do we best organize for that?
Sol: Analysing Mastercard's strategic scenario, we would like to take into account
following aspects:

1. Choosing the right opportunities

 Align with market and customer Needs: Focus on areas where demand for
digital payment solutions is growing, such as online transactions, mobile
payments, and international money transfers.
 Utilize data for insights: Harnessing the data Mastercard already has and can
reveal untapped markets or specific customer issues that new projects could
solve.
2. Deciding which projects to prioritize

 Evaluate strategic alignment and potential gains: Projects that resonate with
Mastercard’s future vision, business model and promise higher returns should
take precedence.
 Balancing innovation with consistency: It's crucial to maintain a balance
between pioneering, high-risk projects and those that guarantee steady
income, ensuring both innovation and financial stability.

3. Making Informed Decisions

 Rely on data-driven insights: Using analytics to evaluate market potential,

competitive dynamics, and profitability is the key to make right decisions.
 Involving key players: Decisions should be collaborative, involving important
stakeholders to ensure comprehensive alignment across the company.

4. Resolving the Payments vs. Digital Services Dilemma

 Adapting to market shifts: The trend in digital payment suggests expanding into
digital services could open up more avenues for growth and is the new
prospective field to explore.
 Building on existing strengths: It's important for Mastercard to expand into
digital services while capitalizing on its established position in the payments
sector else its business model will be compromised.

5. Organizing for the Future

 Embrace agility: An organizational structure that's adaptable and swift in

responding to changes in the market and technology is crucial.
 Invest in people and tech: Ensuring that the company is equipped with the
right talent and tech infrastructure is essential for a successful transition to a
broader digital service role.

Shifting towards a digital services provider, while still leveraging its strong foothold
in the payments industry, appears to be a strategic move in line with evolving market
demands. This transition calls for a flexible and dynamic organizational structure,
backed by the right skills and technology, to keep Mastercard at the forefront of the
digital finance and services sector.

3) What challenges did Mastercard face in transitioning from a

traditional payments company to a digital player? What were the
key decisions and trade-offs faced, in prioritizing and funding its
various digital initiatives?
As Mastercard transitioned from a traditional payments company to a digital player,
it faced several challenges.
 One significant challenge was the risk of becoming a victim of its own success,
as the company found itself pulled in different directions by new
opportunities. While resources were available, they were not sufficient to
pursue every opportunity.
 Additionally, Mastercard had to contend with competitors like Visa, which also
recognized the potential to replace cash and launched initiatives like the “Visa
Cashless Challenge” to encourage small businesses to accept cards instead of
cash.
 Mastercard's approach to innovation within its organizational structure and
culture was centered around Mastercard Labs. This central innovation unit,
supported by portfolio managers and regional innovation leads, managed
programs, and processes to generate, qualify, shape, and develop innovation
opportunities and ideas company wide.
 They aimed to create a culture of innovation focused on developing an
innovation funnel and capturing ideas from both inside and outside the
company.
 Mastercard Labs played a crucial role in addressing the key decisions and
trade-offs in prioritizing and funding digital initiatives. They acknowledged the
goal of failing fast and expected most projects to fail before reaching advanced
stages.
 They used measures like return on product development expense (ROPDE) to
evaluate the effectiveness of their innovation portfolio. An example of their
initiatives was the development of “Smart Stickers,” programmable sensors
that could act as authentication and payment devices, representing a new
solution for the hospitality industry.
 Additionally, Mastercard had to navigate the complex terrain of evolving its
business model to separate cards from payments, focusing on digital IDs, and
becoming a digital services and infrastructure provider. This transformation
required an adaptive ecosystem strategy, collaborating with multiple partners
to create innovative digital solutions.