Digital Value Creation
22th February 2018
Jürgen Seitz
Department of Electronic Media
Stuttgart Media University
Stuttgart, Germany
seitz@hdm-stuttgart.de
Abstract — The starting point and fundament of this
work is the initial Digital Value Creation study. Within this
qualitative examination, on the basis of interviews with experts of
the digital transformation, a total of 22 digitisation initiatives,
aiming at value creation, were identified. These were then logically
clustered into a framework with four categories, namely “Digital
Business Models”, “Digital Business Operations”, “Digital
Marketing & Sales Strategy” and “Digital Mindset”. The research
task of this work was now to evaluate these digitisation initiatives
in terms of the two parameters of value creation potential and
degree of maturity. In order to obtain relevant points of view, an
online survey, based on a quantitative methodology, was
conducted among Chief Digital Officers of companies of the
German-speaking area. As a result, 50 participants answered the
questionnaire, which asked them to evaluate the value creation
potential and maturity level of each digitisation initiative within a
five-point scale. Although Digital Business Operations had the
highest value creation potential, respondents consistently expected
a strong value contribution from the four categories. That can also
be seen as an indicator of the relevance and correctness of the
identified initiatives. Whereas the degree of maturity was rated for
each category with a noticeably lower score, marking a clear need
to catch up. Enriched with the quantified value creation potential
and maturity information, the framework now optimizes
predictability and supports the management in prioritization by
allowing to bring forward such initiatives that promise a higher
value contribution.
Keywords — Digital transformation; Digitisation; Value
creation; Digital maturity model
I. INTRODUCTION
This paper deals with the joint research on value
creation in digital transformation. In order to do so, we begin
with the initial qualitative study on identifying value-adding
dimensions and continue with the quantitative follow-up
examination, in order to validate them.
The objective of the first explorative investigation, was
it to create a better understanding of the C-level manager’s view
on digital transformation, with the focus on Germany.
Therefore, 24 interviews were conducted with Chief Digital
Officers (CDOs), as well as experts and executives in the field
of digitisation in general. As a result of a subsequent software-
supported content analysis, 22 digitisation initiatives, aimed at
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Andreas Burosch
Department of Electronic Media
Stuttgart Media University
Stuttgart, Germany
andreas@burosch.de
value creation, were identified. Afterwards, logically associated
initiatives were assigned to four categories as a framework,
namely:
• Digital Business Models
• Digital Business Operations
• Digital Marketing & Sales Strategy
• Digital Mindset
Each consists of five or six of the dimensions that were
determined. This outcome then formed the starting point for the
quantitative follow-up research and provided the basis for it.
But before turning our attention to the latter study,
chapter two of this paper makes a reference to related research,
which offers an alternative perspective to the created
framework that has been presented in this paper.
II. RELATIONSHIP TO EXISTING WORK
Digitisation Piano [1]: The model, developed at the
IMD business school in Switzerland, with its ten areas of study,
represents the value chain of an organisation. In the illustration,
the framework uses the optics of the keys of a piano, hence its
title. Each individual dimension represents a value driver for the
company and is clustered together with one of the three
sections: “Digital Strategy”, “Digital Engagement” or “Digital
Enablers”. The Digitisation Piano can now be seen as a
guideline that shows, the areas in which changes have to be
made, in order to succeed in digital transformation. Each
company has to determine for itself, exactly how pronounced
the individual value drivers already are, and where there is still
a need for action. Thus, a roadmap can be created, that will lead
to the goal of increased agility with digitisation as a means to
an end. According to the authors, this consists of the three
components “hyperawareness”, “informed decision-making”
and “fast execution”, in order to obtain detailed insights into
customer needs, knowledge of the marketplace and
competitors, data-driven decisions that build on these factors
and the ability to dynamically implement and monitor the
success of measures and their related instruments and resources.
However, the intended agility must always be seen as just an
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interim target, which must support the highest corporate goal of
profitability.
Digital Vortex [1]: This model uses the image of a
vortex to illustrate how strongly the respective industry is
currently affected by digital transformation and how its
competitive environment will change. Industries closer to the
centre (#1 technology; #2 media & entertainment, #3 retail) are
more intensely under the influence of change, but those on the
edge will also move into the centre, at least gradually. The
"Disruption Map", provided by the consulting firms Deloitte
Digital and Heads!, also uses a similar scheme. However, in
their matrix, they also complement a quantified level of
influence that indicates how strongly an industry will be
affected when it is captured by digital transformation [2].
Five Domains of digital Transformation [3]: The
author uses this framework from his book "The Digital
Transformation Playbook" to provide a concept that shows the
relevant areas that every company in the throes of digital
transformation must completely rethink. He sees digital
transformation from a strategic aspect rather than from the point
of view of IT. The approach identifies, in five dimensions, how
companies have traditionally managed their initiatives in these
areas, and then explains why it is necessary to change those
parameters today. The author divides it into five sections:
"Customers", "Competition", "Data", "Innovation" and "Value"
and provides the associated strategic priorities and key concepts
for each.
In this form, these frameworks create awareness of
those initiatives that have to be executed in order to survive the
digital transformation, as a tremendous change to products,
services, processes and complete business models [4]. They
provide a clear overview of the business areas that are affected
by the change and therefore need to be adjusted in order to
generate sustainable value. These models thus support the
development of an advanced (digital) strategy. Only then, a
company will be able to sustainably transform and differentiate
itself and, as a result, succeed in the long term [5].
III. RESEARCH APPROACH
As already mentioned in the introduction, the Digital
Value Creation framework points out 22 digitisation initiatives,
which are aimed at value creation according to revenue, profit
and enterprise value growth, as a superordinate goal of every
company [6]. Now, the follow-up study goes one step further,
in order to evaluate these 22 dimensions from two perspectives.
First of all, the value creation potential should be measured.
Secondly, the maturity level needs to be assessed.
For this purpose, a quantitative investigation, on the
basis of an online survey among Chief Digital Officers and
Heads of Digital Departments in the German-speaking area,
was designed. According to the identified digitisation
initiatives, the questionnaire consisted of 22 matrix questions,
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each containing two items that queried the value creation
potential and the degree of maturity, according to a five-point
Likert-scale, ranging from “non-existent” (1) to “low” (2),
“rather low” (3), “rather high” (4) and finally, “high” (5). In a
six-week field phase, at the end of 2017, 50 (n) respondents
could be acquired through the business networks XING,
LinkedIn, via email and telephone.
IV. FINDINGS
The results are now presented from three viewpoints
with a particular focus on the findings from each section. In
order to stay within the scope of this paper, the intention is
mainly to respect the level of the dimension categories and not
to go too deeply into the evaluations of the 22 individual
dimensions. Starting with the value creation potential, the
analysis and interpretation should always be accompanied by
managerial implications.
The first perspective should therefore reveal which of
the dimensions it is more advisable for a company to exercise,
due to the high positive value contribution, they are likely to
generate, and which are less advisable, because they are likely
to generate no added value or very little. As an outcome, the
graphic also represents a ranked checklist that will provide an
overview of the digitisation efforts that need to be made, in
order to successfully master digital transformation with the
significant objective of value creation. Since, in principle, it
must be assumed that the available resources within companies
are limited, the ranking helps to identify those dimension
categories that need to be prioritised, because they signal a
particularly high value creation potential.
Ø Value creation potential of the dimension categories
(4.00)
5
4.04 4.03 4.02 3.91
4
3
2
1
Digital Business Digital Mindset Digital Business Digital
Operations (n=44) Models Marketing &
(n=45) (n=50) Sales Strategy
(n=44)
Ø Value creation potential
Fig. 1. Value creation potential of the dimension categories
Although the first three positions are very close
together, the Digital Business Operations category is the
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winner, with an average value creation potential of 4.04 (>
"rather high"), according to the digital chiefs’ judgment of the
activities, bundled here together as the most promising in terms
of value creation. These initiatives are about reengineering the
business to adapt to the new technologies and changing user
behaviour in digital transformation. But Digital Mindset (4.03)
too, relating to the staff’s set of skills and Digital Business
Models (4.02), should not be ignored, because of their close
placement in the creation of added value. Only Digital
Marketing & Sales Strategy (3.91) fall a bit further behind in
the ranking. This dimension category subsumes activities in the
area of gaining new customer groups and distributing via digital
channels. Overall, the four dimension categories have an
average value creation potential of 4.00, and are thus considered
as "rather high".
Secondly, the evaluation of the degree of maturity is
now done. In order to measure this, survey participants were
asked how far they have progressed with the digitisation
initiatives in their companies. Assuming that the 22 dimensions
represent a company's digital transformation efforts
holistically, this information can reveal the degree of maturity.
This is a measure of how pronounced the individual dimensions
already are, thereby indicating how much of the digital
transformation challenge has already been mastered. A full
advance would therefore stand for optimal prospects to
successfully accomplish the digital transformation. The
consideration of the degree of digital maturity also provides
information about how much effort has already been invested
in digital transformation by the companies. Since it was
previously found, that none of the dimensions can be neglected,
due to insufficient value creation potential, it is worth analysing
the maturity level of each dimension, because obviously none
of them are irrelevant.
Consequently, the degree of maturity itself is an
interesting measure of the transformation progress and can thus
be understood as a model that reflects the current status of
digital transformation. Comparable to other maturity models,
here are the four categories, that differentiate the various
subject areas. Among them are the 22 assigned dimensions of
the concrete fields in which a company has to be active for
successful digital transformation. Therefore, the
recommendations for action result from the respective degree
of maturity itself. If a dimension indicates a low value, for
example, the need to invest further effort there is higher than
for those with a high degree of maturity.
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Ø Degree of digital maturity of the dimension categories
(2.99)
5
4
3.16 3.07 2.97
2.75
3
2
1
Digital Business Digital Business Digital Digital Mindset
Operations Models Marketing & (n=44)
(n=45) (n=50) Sales Strategy
(n=44)
Ø Degree of maturity
Fig. 2. Degree of digital maturity of the dimension categories
The chart shows the category Digital Business
Operations with a maturity level of 3.16 (> "rather low") again
in first place. In contrast to the view of the value creation
potential, the four dimension categories distance themselves
more clearly from each other on this side of the average degree
of maturity. Digital Business Models follows in second
position, with a rating of 3.07. The two last-placed categories
are now below the overall average and thus indicate, most
strikingly, that there is still a need for action there. Digital
Marketing & Sales Strategy describes the acquisition of new
customer groups and the distribution via digital channels, and
at an average score of 2.97, it is in the penultimate place. Digital
Mindset is in last place, also with a less than "rather low"
average maturity of just 2.75. As a result, companies see
themselves as least advanced in the field of qualified personnel.
Such initiatives, which aim to establish a culture among
employees, which is open to digital ideas and has no
reservations about modern technologies, should be stepped up
much more in the future.
The average degree of maturity in the overall view is
2.99 and thus almost exactly on the assessment level of "rather
low". As a consequence, there is still a clear gap to a complete
digital transformation of the companies and an unmistakable
need for action in all dimension categories.
Corresponding to the two measures in which the 22
dimensions were evaluated in the empiric procedure, the
previous subsections were dedicated to an analysis and
evaluation of the two perspectives of the value creation
potential and the degree of maturity. These viewpoints were
consciously treated separately from each other, so that the
findings could be worked out in a focused manner. An
extension of the research findings now goes beyond the two
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parameters, by examining the discrepancy between the value
creation potential and the level of maturity of the digitisation
initiatives. This is particularly legitimate, because both objects
were measured on the same scale and the difference between
the two scores can thus be used for further analysis. The contrast
should therefore be formed as a separate indicator for each
individual dimension category and consequently allow a
combined view. From this angle, new insights should be visible.
If, for example, the degree of maturity of a specific digitisation
initiative is particularly low, but the value creation potential is
very high, this suggests an exceptionally efficient way to
generate a high positive value contribution. In this case, there is
a large discrepancy between the two ratings and the maturity
level is also at a very low level. This speaks in particular for the
attributes of a so-called "quick win", which is justified in the
fact that progress on a dimension that still has a low degree of
maturity, can clearly be optimised more easily and faster than
if the initiative is already far advanced and should be brought
forward to the same degree. If the dimension now also has a
high value creation potential, a big lever becomes apparent. In
simple terms, a high added value can be realised promptly with
little use of resources. It is therefore important to identify these
dimensions in this analysis.
For the graphical presentation of the following
overview, a bubble chart will be used, which provides the value
creation potential on the abscissa and the degree of maturity on
the ordinate. The bubble diameter indicates the difference
between the two scores. In order to make the distances of the
four categories visible, consciously reduced bandwidths have
been chosen for the x- and y-axes. Due to this diagram structure,
the dimension categories of interest tend towards the lower right
corner, because this positioning expresses a high value creation
potential, while speaking for a low degree of maturity, and
therefore the discrepancy is high. In this respect, there is a clear
need to catch up and a high value creation potential. Advances
by companies in this area can thus be realised efficiently and
are rewarded with a high positive value contribution.
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Discrepancy between value creation potential and degree of
maturity of the dimension categories
3.5
Degreee of maturity
0.88
0.95
3 0.94
1.28
2.5
3.8 3.9 4 4.1
Value creation potential
Digital Mindset (n=44)
Digital Business Models (n=50)
Digital Marketing & Sales Strategy (n=44)
Digital Business Operations (n=45)
Fig. 3. Discrepancy between value creation potential and degree of maturity
of the dimension categories
So, above all, it is the category Digital Mindset, which
needs to be highlighted. At a value of 1.28, there is a drastic
difference between the two parameters, and furthermore, the
value creation potential is also assessed as being absolutely
strong, while the maturity level is also absolutely at a low level.
Activities in this area of the staff’s skills set are therefore
attractive because of these characteristics, as they can be
implemented efficiently and have a noticeably positive effect
on value creation. The three remaining dimension categories are
inferior and fall significantly further behind in this evaluation
perspective. For example, at 4.04, Digital Business Operations
occupies first place in terms of value creation potential – albeit
with a minimal lead – but the degree of maturity (3.16) is
comparatively pronounced, so that there is less space above and
the difference (0.88) is consequently lower. The situation is
similar with Digital Business Models. Again, the average value
creation potential of 4.02 is relatively high, but the average
maturity level is also higher, as in the case of Digital Mindset,
resulting in a discrepancy of 0.95. That of Digital Marketing &
Sales Strategy is even further behind, by 0.01.
It can be stated in this combined overall analysis, that
the average degree of maturity for each dimension is generally
positioned behind the average value creation potential. The
average value creation potential in the total consideration, over
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all four dimension categories, is 4.00, whereas the score for the
degree of maturity is 2.99, and consequently a difference of
1.01 is obtained. The former score of 4.00 confirms the
dimensions identified in the Digital Value Creation study, as
having precisely a "rather high" value creation potential. At the
same time, the degree of maturity is at a "rather low" level. So,
obviously there is still substantial ground to be covered, in order
for digital transformation to succeed.
V. CONCLUSION
The initial explorative and qualitative Digital Value
Creation study came up with 22 dimensions, divided up into
four categories, creating a valuable framework for digitisation
initiatives, with the aim of achieving a positive value
contribution towards mastering digital transformation. The
quantitative follow-up research, based on an online survey
among digital executives, then assessed these outcomes
according to the parameters of value creation potential and
degree of maturity.
Regarding the evaluation of value creation potential
with an overall average score of 4.00 (‫؜‬Dz”ƒ–Š‡”Š‹‰Šdzሻǡ where
differences lie in detail, none of the dimension categories can
be disregarded. On the contrary, the relatively strong ratings
indicate the relevance of each dimension. Nonetheless, the top-
ranked category, Digital Business Operations, which deals with
the reengineering of the business to adapt to the new
technologies and changing user behaviour in digital
transformation, should be prioritised.
The maturity level, as a measure of the digital
transformation progress, results in a score of 2.99. Considering
that the companies are apparently still right in the middle of
digital transformation, this assessment of the "rather low"
degree of maturity in terms of a complete and successful digital
transformation, seems to be authentic for the current time. The
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Digital Mindset category, with the lowest level of maturity,
should be especially highlighted. Therefore, the framework
proposes to pay special attention to activities that affect the staff
or their education. For this purpose, especially those employees
who have competence in the digital field should be hired. In
addition, they should be empowered to independently initiate
innovations, even with an uncertain outcome. It is up to the
executives to win the staff for the cause of the transformation
and to motivate them. The analysis of the discrepancy of the
value creation potential and the degree of maturity also points
out Digital Mindset, and therefore supports this view.
In summary, the 22 dimensions subdivided into their
four categories provide a valuable and helpful overview for the
management to check the completeness of their own
transformation efforts. In addition, the quantification, taken
place in this work, helps to judge the prospective value
contribution in order to prioritize the digitization initiatives and
to optimize their predictability.
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