SLOANREVIEW.MIT.EDU FALL 2019 MIT SLOAN MANAGEMENT REVIEW 69
proceeds through development of a minimum viable
product that customers test and use, and then enters a
stage of continuous improvement, expansion, and de-
velopment of related offerings. By using iterative
development approaches and coinnovation — and by
abandoning legacy IT methodologies and predigital
product R&D practices — Schneider has collapsed
the time from ideation to industrialization from two
or three years to just a year.
By the end of 2018, Schneider had around 40
digital offerings, including services for asset man-
agement (that is, predictive maintenance), energy
resource management for C-level business fore-
casting and budgeting, and consolidated remote
monitoring of specialized machine fleets. Another
20 offerings were nearing rollout.
As is true at other big, old companies in the midst
of digital transformations, Schneider’s digital offer-
ings garner just a small percentage of the company’s
total revenues and profits. But digital offerings are
growing faster than traditional products and ser-
vices, and they promise greater profitability over
time. Perhaps more important, Schneider did not
wait for competitors to usurp the company’s digital
opportunities. It is embracing disruption profitably
by identifying what’s possible and what customers
are inclined to fund.
IN LARGE ORGANIZATIONS, learning does not
naturally flow across the enterprise. People with an
idea want it to succeed and are often tempted to
tweak an unsuccessful idea rather than abandon it.
But learning from experiments depends on recog-
nizing what isn’t working and shifting resources to
something that might be more successful. And as
companies discover what customers do and don’t
want, they need to design processes and teams to
ensure shared customer insights.
Building insights on both the capabilities of digital
technologies and the interests of customers involves
upending established management practices and in-
dividual habits and forcing a change in corporate
culture. Taking an iterative test-and-learn approach to
developing offerings will be a foreign concept to
almost anyone who has risen to the top of an estab-
lished company. Pharmaceutical companies have
10-year development cycles; auto manufacturers
often take five years to develop, test, and roll out new
products. These long cycles involve huge allocations
of resources. They are “big bet” strategic initiatives.
Most digital innovations are much smaller bets.
A few of those smaller bets could become very big
deals, but most will be discarded. Conducting digi-
tal experiments is like betting a tiny amount on all
the horses in a race and then having the option to
increase any bet at various points during the race.
There is no need to make a big bet until the winner
is almost certain. Learning how to accumulate and
share customer insights allows companies to place
their bets in this way — on those digital offerings
that customers are actually willing to pay for.Jeanne W. Ross is principal research scientist for MIT’s
Center for Information Systems Research. Cynthia
M. Beath is a professor emerita of information systems
at the McCombs School of Business at the University
of Texas at Austin. Martin Mocker (@martinmocker) is
a research affiliate at MIT’s Center for Information Sys-
tems Research and a professor of information systems
at ESB Business School at Reutlingen University in
Reutlingen, Germany. This article is adapted from the
authors’ forthcoming book, Designed for Digital: How
to Architect Your Business for Sustained Success
(The MIT Press, 2019). Comment on this article at
http://sloanreview.mit.edu/x/61103.REFERENCES- The authors’ case studies and survey reports on
this topic are available as working papers from the MIT
Sloan School of Management’s Center for Information
Systems Research (CISR), http://cisr.mit.edu. - P. Betancourt, J. Mooney, and J.W. Ross, “Digital Inno-
vation at Toyota Motor North America: Revamping the
Role of IT,” working paper 403, MIT CISR, Cambridge,
Massachusetts, September 2015. - S.K. Sia, C. Soh, and P. Weill, “How DBS Bank Pursued
a Digital Business Strategy,” MIS Quarterly Executive 15,
no. 2 (June 2016): 105-121. - G. Platt, “World’s Best Bank Awards 2018: DBS
Named Best Bank in the World,” Global Finance 32,
no. 9 (October 2018). - L. Lorenzetti, “Royal Philips Is Headed for a Breakup,”
Sept. 23, 2014, http://www.fortune.com. - M. Mocker and J.W. Ross, “ING Direct Spain: Manag-
ing Increasing Complexity While Offering Simplicity,”
working paper 390, MIT CISR, Cambridge, Massachusetts,
June 2013. - J.W. Ross, C.M. Beath, and K. Moloney, “Schneider
Electric: Connectivity Inspires a Digital Transformation,”
working paper 417, MIT CISR, Cambridge, Massachusetts,
May 2017.
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