In our reading for this week, “Implementing a Digital Strategy,” the authors introduce us to a number of concepts including digital strategy, digital transformation, strategy implementation, alignment of strategy and digital strategy, etc. The authors illustrate these concepts through the examples of three companies that have undertaken a digital strategy implementation.
Based on this reading and drawing from your own experiences, I’d like you to discuss two things:
1. In your opinion, what is the key issue for a successful digital strategy implementation? Does the key issue differ if you look at it through the lens of an IT manager versus a non-IT manager?
2. Discuss another example of either a successful or unsuccessful digital strategy implementation either based on your own experience in industry or one you’ve read about. If it was a successful implementation, what was the key factor that lead to its success? If it was an unsuccessful implementation, what was the key factor that lead to its failure?
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37
Implementing a
Digital Strategy:
Learning from the experience
of three DigitaL
transformation projects
Alessia Correani1, Alfredo De Massis2, Federico Frattini3,
Antonio Messeni Petruzzelli4, and Angelo Natalicchio4
SUMMARY
The rapid growth of digital technologies and the extraordinary amount of data
that devices and applications collect each day are increasingly driving companies
to radically transform the business architecture through which they create and
appropriate value. However, companies may fail to extract value from digital
transformation due to the disconnection between strategy formulation and
strategy implementation. Through the analysis of three case studies of firms that
digitally transformed their business—namely ABB, CNH Industrial, and Vodafone—
this article presents a framework than can help companies implement their digital
transformation strategy and thereby renovate their business model.
KeYwoRDS: digital transformation, digital strategy, strategy implementation
“Many companies define great digital transformation strategies, but there is a huge
difference between having a well-reasoned digital strategy on paper and success-
fully implementing it . . . Most digital transformation projects fail due to poor
strategy execution.”
—Adriano Gerardelli, Director of Digital Strategy & Innovation,
PricewaterhouseCoopers (PwC)
1Microsoft Italy, Milano, Italy
2Free University of Bozen-Bolzano, Bolzano, Italy; Lancaster University, Lancaster, United Kingdom;
Zhejiang University, Hangzhou, China
3Politecnico di Milano, Milano, Italy
4Politecnico di Bari, Bari, Italy
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CALIFORNIA MANAGEMENT REVIEW 62(4)38
T he remarkable growth of digital technologies and the increasing per-vasiveness and reliability of high-speed Internet services have radi-cally reshaped the operations and business models of companies.1 This has led to substantial changes in their activities, processes, and
capabilities.2 A growing number of companies have adopted a digital transforma-
tion strategy to transform how they create and appropriate value. Consequently,
they need to reexamine and revise the current architecture of their value cre-
ation and appropriation models to sustain their competitive advantage. Also, a
key requirement for firms adopting digital transformation is to renovate their
business models so that they are consistent with their business strategy.3
New digital technologies can improve competitive performance by increas-
ing the flexibility of products and services by supporting the continuous evolution
of their scope, features, and value, even after they have reached the market;4
lowering the barriers across industries, favoring connections, exchanges, and
partnerships among companies operating in different sectors;5 and supporting
companies in accessing continuous, timely, and reliable data streams.6
Digital transformation can lead to notable advantages for firms, such as
helping create products and services that are more efficient and consistent with
customer needs,7 providing a shorter innovation process and time to market,8 and
creating related digital ecosystems.9 Moreover, digital transformation favors the
interconnection among diverse industries by guiding firms to new opportunities
for creating and appropriating value through digitization and connectivity.10 For
instance, Becton Dickinson, a medical equipment manufacturer, has been devel-
oping connections with software and analytics industries to increase the effective-
ness of its products.11 Also, another example of how digital transformation reduces
barriers between industries is that companies such as Google, Apple, and Uber are
devoting more attention to the automotive industry for the development of
autonomous vehicles.
However, the adoption of digital transformation strategies also involves
challenges.12 According to recent estimates, 66% to 84% of digital transformation
projects fail,13 which is a sizable proportion considering the costs, both monetary
and otherwise, of putting these projects in place. One major challenge is to ensure
consistency between strategy formulation and strategy implementation,14 which
despite their interdependence are considered distinct concepts. Specifically, digital
strategy formulation refers to defining a guiding policy for the creation and appro-
priation of value by exploiting digital technologies to achieve long-term objec-
tives—which include factors related to the external environment, the technological
potential in the current competitive scenario, and the evolution of the market.
Therefore, digital strategy formulation should identify the elements of the firm’s
business model that must be modified according to the new strategy, along with
the scope of the digital transformation.
In contrast, digital strategy implementation refers to how firms translate
the digital strategy formulated into a concrete plan and set of actions.15 Careful
implementation is crucial to ensure consistency between the firm’s actions and
Implementing a Digital Strategy: Learning from the Experience of Three Digital Transformation Projects 39
the objectives defined in the digital strategy formulation.16 In fact, existing
knowledge implicitly assumes that once a strategy has been defined, implemen-
tation will follow.17 However, corporate practice shows that this is not always the
case, and senior executives cannot achieve any benefit from digital transforma-
tion strategies if they cannot effectively implement them.18 Prior studies point
out that effective strategy implementation is more critical for avoiding failure as
compared with good strategy formulation.19 On the one hand, a precise imple-
mentation allows for adaptation to evolving conditions,20 thus correcting for an
inaccurate formulation,21 but on the other hand, a good formulation is of no
value if not properly executed.22
A prominent example of this is GE. GE’s top management planned to digi-
tally transform the firm. However, while deemed an appropriate strategic choice
in the current competitive environment, GE failed to implement this strategy to
the point of having to fire more than 100 employees at the software operation
facility that had been created to support GE’s digital strategy.23 Recently, John
Flannery, GE’s CEO, pointed out that the company is “still deeply committed to
[digital], but we want a much more focused strategy.”24 Given such disconnection
between strategy formulation and implementation,25 our aim is to understand
how firms can implement a digital transformation strategy. Specifically, we describe
and analyze three cases of firms that digitally transformed their business—ABB,
CNH Industrial, and Vodafone. They were supported by a “digital companion”
globally renowned for its excellence in the execution of digital transformation
strategies, namely, Microsoft. The rich body of qualitative evidence allowed us to
identify the critical building blocks—resources, capabilities, and activities, as well
as stakeholders—that need to be taken into account when a firm implements a
digital transformation strategy. Our framework illustrates how the three compa-
nies used these building blocks to ensure consistency between their strategy for-
mulation and implementation, which led to successful digital transformation
projects. In particular, our framework allows companies to renovate their busi-
ness models, conceived as the “conceptual and architectural implementation of a
business strategy.”26
Conceptual Background
The increasing spread of new digital technologies is disrupting exist-
ing industries.27 Indeed, due to digitalization, many products and services offer
new features and functions. A prominent example is the Nest thermostat, which
alongside the traditional functions increases energy use efficiency by collecting
data on energy consumption, sharing these with utilities for more accurate fore-
casting, improving the service, providing customers with suggestions to reduce
energy consumption, and connecting to other home devices.28 Another notable
example of a company that has completely and successfully revised its busi-
ness thanks to digitalization is Netflix. Originally, Netflix was an online digital
video disk (DVD)-by-mail sales and rental store. However, consequent to the
boost in data connection speed and its lower costs, as well as improvements in
CALIFORNIA MANAGEMENT REVIEW 62(4)40
video-on-demand service effectiveness and efficiency, Netflix digitally trans-
formed its competitive strategy by offering a worldwide video streaming ser-
vice, exploiting data on movie consumption to understand major trends in the
entertainment business, and eventually becoming an original content producer.29
As these two examples show, the pervasive use of digital technologies and the
ability to collect consumption and utilization data enable companies to rewire
their traditional business model into a digital business model30 that can lead to
increasing their competitive advantage.
However, digital transformation is not always straightforward. Indeed, due
to the disruption in activities, processes, and capabilities, digital transformation
processes often fail.31 Despite the appropriateness of adopting a digital transforma-
tion strategy, the outcomes may be far from those expected. For instance, as in the
GE case, Nike failed to reap the benefits of digital transformation with its Nike+
personal fitness products.32 Nike+ products incorporated sensors that collected
data on customer activities, and synchronized these through a web platform. In
this way, customers could receive feedback and suggestions to improve their
physical performance, along with the possibility to access a virtual community of
friends, athletes, and coaches.33 In turn, Nike could collect data on customers
(including their activities and preferences) to fine-tune its marketing activities.34
However, while the digital transformation project was promising, Nike discontin-
ued its Nike+ products35 and only recently attempted to apply digital technologies
to achieve a different objective.36
There are many reasons why digital transformation projects fail, includ-
ing the failure to consider important aspects of change management in relation
to employees and customers who are required to change their way of working
and interacting with the brand. Developing a proper strategy for effectively
leveraging digital technologies is crucial for the success of digital transforma-
tion projects.37 Defining a digital transformation strategy corresponds to devel-
oping a plan of action to achieve a specific goal38 through the strategic renewal
of the firm.39 However, despite formulating an appropriate digital transforma-
tion strategy, companies often fail in implementing the strategy because imple-
mentation is particularly risky and uncertain when companies have to deal
with a disruptive change to their business following the introduction of new
digital technologies.40
In order to effectively support the actual implementation, firms need to
rely on business models that reflect each, individual firm’s strategy.41 In fact, busi-
ness models are a conceptual tool used to depict how firms create and appropriate
value, adapting the previously defined strategy to the contingencies that actually
take place.42 Hence, they represent a logical structure for the linkage between the
formulated strategy and its contingent implementation.43 Business models
describe the elements and the relationships leveraged by firms to create and
appropriate value.44 They are made of four main components: the firm’s value
proposition and market segments; the structure of the value chain; the mecha-
nisms used by the firm to appropriate the value provided; and the relationships
Implementing a Digital Strategy: Learning from the Experience of Three Digital Transformation Projects 41
among these elements.45 They provide a complete description of a firm’s strategy46
and can be helpful when companies need to thoroughly revise their strategies due
to disruptive changes.47
A digital transformation may require a substantial change in the business
model to reap the maximum advantages and to reduce the cost burden.48 In a
digital transformation strategy, the role of the business model is essential in
adapting the architecture of a firm’s value proposition, market segments, value
chain, and value appropriation to emerging contingencies.49 The introduction
of digital technologies calls into question the traditional way of doing busi-
ness,50 and companies must thus reconsider which elements to leverage to
establish and sustain their competitive advantage.51 Identifying the core aspects
behind a digital strategy and its implementation allows companies to apply the
digital lens to their current business, ascertain new modes of value creation,
evaluate new ways of value appropriation,52 and consequently renew their
strategies.53 For instance, while data streams are paramount for firms adopting
digital technologies,54 traditional business model frameworks55 do not assign
them the central role they have in supporting the digital transformation.
Research Design and Methodology
For our research, we adopted a case study methodology56 along with the
principles of engaged scholarship.57 One of the authors is a Microsoft manager
who directly followed several digital transformation projects on behalf of her
company. Notably, Microsoft has, in recent years, increasingly partnered with
companies wishing to transform their businesses by leveraging data and tech-
nologies, thus becoming an influential player in the digital transformation eco-
system. Acknowledging the difficulties that enterprises may face in embarking
on digital transformation processes, Microsoft has positioned itself as a partner
aiming to accompany firms along this journey by becoming a “digital compan-
ion” for organizations embracing a digital transformation strategy. Satya Nadella,
Microsoft’s CEO, explained this strategic vision, noting,
Companies are focused on ensuring that they stay relevant and competitive by
embracing this [digital] transformation. And we want Microsoft to be their part-
ner. To do so, there are four initiatives every company must make a priority. The
first is engaging their customer base by leveraging data to improve the customer
experience. Second, they must empower their own employees by enabling greater
and more mobile productivity and collaboration in the new digital world of work.
Third, they must optimize operations, automating and simplifying business pro-
cesses across sales, operations, and finance. Fourth, they must transform their
products, services, and business models.58
Given the vision and commitment to partnering with firms to help them
digitally transform their businesses, the three companies that Microsoft accom-
panied provide an opportunity to observe how digital transformation strategies
are implemented with the assistance of an expert companion. Indeed, Microsoft’s
CALIFORNIA MANAGEMENT REVIEW 62(4)42
experience was fundamental to identifying the specific building blocks that con-
stitute the framework we constructed from our analysis.
For our sampling strategy, we selected digital transformation projects
that had involved Microsoft and can be considered exemplars for the imple-
mentation of a digital transformation strategy.59 The author who is a Microsoft
manager critically revised the portfolio of projects she has participated in dur-
ing the last five years with the idea to build a polar-type sample, which included
both successful and unsuccessful cases of digital strategy implementation. The
idea was to compare implementation projects that delivered positive results
with those that were unsuccessful to spot differences and unearth factors linked
with successful digital strategy implementation more easily. Unfortunately, due
to privacy and confidentiality reasons, it was not possible to have access to the
data required to carefully study the unsuccessful cases. Therefore, we decided
to focus on cases that were illustrative examples of a successful alignment
between strategy formulation and implementation in different contexts (in
particular, manufacturing and service companies) to allow for potential differ-
ences among cases. Following these criteria, the case selection brought to our
attention three organizations that successfully implemented a digital transfor-
mation strategy (ABB, CNH Industrial, and Vodafone), allowing us to highlight
the critical elements to take into account to effectively implement a digital
transformation strategy. Thanks to the direct involvement in the realization of
these projects by one of the authors, we have had privileged access to data and
information that were especially useful to inductively build a model of digital
strategy implementation.
Data from the cases were collected using primary and secondary sources. In
particular, our Microsoft-affiliated author was directly involved in the digital
transformation implementation in the three cases, working on the execution of
these projects for an average period of 12 months each, consistent with the
engaged scholarship methodology.60 She had the opportunity to take part in the
projects and access primary sources of information, such as aggregated data, inter-
nal archival records and reports, and interviews with those involved in the digital
transformation processes. In particular, the interviews were based on a structured
list of questions designed to provide a clear understanding of the digital transfor-
mation processes and the business model renewal. Moreover, interviewees were
encouraged to share further insights that could support the research team to get a
clearer picture of the processes. Furthermore, secondary sources, including corpo-
rate websites and business magazine articles, provided a clear picture of the pro-
cesses. The data were gathered in 2018 and refer to the period 2016-2018. Table
1 reports some general information on the cases.
The researchers then analyzed the data collected following an inductive
approach. The authors independently reviewed the cases to identify the building
blocks supporting the implementation of a digital transformation strategy. In the
first phase, each author coded and labeled the transcripts of the interviews and
other primary and secondary sources documents in order to highlight features
Implementing a Digital Strategy: Learning from the Experience of Three Digital Transformation Projects 43
related to the business model transformation of each case and referring to typical
business model elements.61 Afterward, the results of this phase were compared
across cases to spot similar patterns and emerging concepts.62 Then, the individual
outputs were discussed and synthesized during ad hoc meetings to construct the
proposed framework. In particular, the definition of the business model elements
to be included in the proposed framework was consistent and representative with
regard to the theoretical understanding about business model elements.63 During
this phase, the emerging results were continuously compared with the literature
to spot confirming and conflicting findings with respect to the extant knowledge.
In this way, we corroborated the internal validity and increased the generalizabil-
ity of our results.64 Finally, we asked our key informants whether they felt the
framework was a reasonable description of what had occurred at the companies
in light of their own experiences, and all agreed.
Table 1. Overview of the Three Case Studies.
abb CNH Industrial
Vodafone
Business Electrical equipment Agricultural equipment Telecommunications
Size 147,000 employees
(2018)
63,000 employees
(2017)
111,000 employees
(2018)
Headquarters Zurich
(Switzerland)
Amsterdam
(The Netherlands)
London
(United Kingdom)
Founded 1988 2012 1991
Main objective
of the digital
transformation
project
Develop smart
products that
allow providing
value-added
services to
customers
Develop autonomous
unmanned agricultural
machines endowed
with AI
Improve customer
care services using
conversational
autonomous
interfaces based
on AI operating
through a number
of channels
(web, apps, social
networks, etc.)
Start of digital
transformation
project
2016—year of
ABB Ability™,
under which ABB
consolidated its
digital solutions
2017 2017
Number of
employees
involved
Undisclosed 30 employees including
Commercial Vehicles
and Industry-specific
Vehicles Unit Managers
and IT, Operations,
and Executive Business
Stakeholders
23 employees
working in
Commercial
Operations Unit
and five employees
working in IT
Note: AI = artificial intelligence; IT = information technology.
CALIFORNIA MANAGEMENT REVIEW 62(4)44
Overview of the Three Cases
ABB
Established in 1988 after the merger of Sweden’s ASEA and Swiss Brown
Boveri and Cie, ABB is a Swiss/Swedish company that operates in power and
automation technology development with utilities and industrial firms as cus-
tomers. Its roots go back more than 130 years. ABB has been driving digital
transformation since the early 1970s when ASEA introduced the world’s first
microprocessor-controlled robot. This process resulted in the launch of the ABB
Ability™ brand in 2016, under which ABB consolidated its digital transformation
solutions, focused on creating additional value for customers by providing soft-
ware-enabled services. One of ABB’s objectives was to offer a pay-per-use service
for specific devices, and to do so, it created digital solutions to continuously sense
the state of devices and offer digital support services, such as predictive mainte-
nance, forecasting, and optimization.
CNH Industrial
CNH Industrial, registered in the Netherlands with corporate offices in
London, was founded in 2012 following the demerger of Fiat’s nonautomotive
businesses. Previously, these had been run as two separate Fiat-owned business
units, Fiat Industrial and CNH Global. CNH Industrial’s core business is the design
and production of agricultural and construction equipment, commercial vehi-
cles, and powertrains. CNH Industrial also offers financial services to its custom-
ers. The digital transformation project under study focused on the agricultural
equipment business. In particular, CNH Industrial is committed to driving the
evolution of the agricultural industry, supporting the development of the digital
farming paradigm. Specifically, CNH Industrial aims to connect all the stages of
farming through a digital platform to offer automation capabilities, value-added
services, connecting customers with internal and external partners, and promot-
ing a servitized business model. The digital transformation project we analyzed
began in 2017 and involved developing autonomous unmanned agricultural
machines, endowed with artificial intelligence (AI), that operate through a digi-
tal platform. In total, 30 employees were involved in the project, including man-
agers from the commercial vehicles unit, industry-specific vehicles unit, as well
as information technology (IT), operations, and executive business stakeholders.
Vodafone
Vodafone is a United Kingdom-based company founded in 1991 and oper-
ating in the telecommunications industry. Vodafone is a mobile operator pres-
ent in 25 countries in Europe, Africa, Asia, and Oceania, while also covering the
Americas with partnerships. Vodafone’s digital transformation project began in
2017 and was focused on improving its customer care services, deemed critical
to retaining customers. Specifically, Vodafone’s objectives were cost reduction,
customer care process optimization, and improving digital interaction with cus-
tomers through AI. Accordingly, Vodafone leveraged Microsoft’s digital services
to develop conversational autonomous interfaces based on neural networks
Implementing a Digital Strategy: Learning from the Experience of Three Digital Transformation Projects 45
processing natural language, and able to interact with customers through several
channels (e.g., voice, apps, social networks, websites, and home assistants). The
project initially involved five employees from the IT unit and 23 from the com-
mercial operations unit. Moreover, thanks to a successful process of change man-
agement and new operating model implementation, the project has now added
several digital hubs that operate following agile methodologies in developing
their new digital products with an incremental and iterative approach. This digi-
tal transformation project is redefining the way Vodafone listens, understands,
and assists end customers, which, after rolling out in Italy, will be extended to
other countries in which Vodafone operates.
Findings
The analysis of the three case studies allowed us to construct a framework
that companies can use to effectively implement their digital transformation
strategies (Figure 1).
Our cases suggest that the starting point of the effective implementation of a
digital transformation strategy is defining the scope of the transformation.65 Clearly
defining what a company wants to achieve is critical to maintaining focus on the
digital transformation goal and ensuring the consistency of each building block with
the strategy formulated. In fact, a major output of the strategy formulation process
is the definition of the organization’s strategic goals.66 A crucial element of a digital
transformation strategy, and consequently of our framework, is data. Indeed, data
have a central role in the digital economy67 and are an enabler of digital transforma-
tion.68 The most important aspect of data usage is that it must be constantly
refreshed. New data need to be continuously collected to support the analyses and
FIgure 1. The digital strategy implementation framework.
Scope
Core
Complementary
Transformed
Ac�vi�es, Task and
Services
Customers
Internal Data
External
Data
Data
Pla�orm
Ar�ficial
Intelligence
Informa�on
and
Knowledge
People
Partners
Processes
and
Procedures
Processes
and
Procedur
es
Processes
and
Procedures
Exis�ng
New
Processes
and
Procedures
Processes
and
Procedures
CALIFORNIA MANAGEMENT REVIEW 62(4)46
data models in a feedback loop. Once collected, cleaned, and securely stored, data
are then ready to be processed through specific AI techniques69 to extract informa-
tion that feeds the organizational knowledge base. Companies must define the rel-
evant job roles,70 the strategic partners, and the processes and procedures71 needed
to support the information extraction and knowledge generation process. Then, the
information and knowledge generated is used to carry out and support the trans-
formed activities, tasks, and services that create value for customers.72
Scope
To be effective and avoid inefficiencies, companies must have the scope
of the digital transformation strategy clearly in mind.73 This is the cornerstone of
defining how the company envisions creating value for its customers. Such scope
is defined on the basis of the strategic goals resulting from the strategy formula-
tion process and favor the connection bewteen strategy formulation and imple-
mentation. In the three cases, the scope of the digital transformation was clearly
defined as follows:
• ABB: Create continuous value for customers through software- and platform-
enabled services.
• CNH Industrial: Develop new services around predictive maintenance and
intelligent logistics through the digitalization of its fleet.
• Vodafone: Automate and improve customer care.
CNH Industrial and ABB sought to change their business by creating digital
platforms that collect data and leverage data to enable new, high added-value
services for their customers. Vodafone sought to enhance the value of extant ser-
vices, such as customer care, by leveraging digital technologies.
Data Sources (External and Internal)
Properly managing data is critical to effectively support the digital trans-
formation of firms,74 while the peculiar role of data in value creation has been
sometimes overlooked and recognized only recently.75 The three companies rely
on both internal and external data sources to implement digital transformation
strategies. For instance, in the ABB case, the company needed to understand
how customers use its products to gain useful insights for the entire organization.
To achieve this, ABB relied on internal data sources, such as the data provided
by Internet of Things (IoT) devices connected with products, and external data
sources, such as consultants, installers, panel builders, and original equipment
manufacturers (OEMs). CNH Industrial uses sensors on products to determine
the status of vehicles, while data sourced from external partners (e.g., retailers,
insurance companies, and seed and fertilizer suppliers) are useful to infer addi-
tional insights. Similarly, Vodafone largely relies on internal data obtained from
customer interactions, while baseline conversational models allow fine-tuning
the service. Since critical resources, such as data, allow to establish and sus-
tain the firm’s competitive advantage,76 the three companies were very careful
Implementing a Digital Strategy: Learning from the Experience of Three Digital Transformation Projects 47
in ensuring their control over them. In some cases, companies need to ensure
access to data sources by internalizing them (e.g., using IoT devices to guarantee
a continuous data stream from products sold) or by establishing reliable agree-
ments with external sources, such as formal partnerships.
Data Platform
Data are usually transmitted via a data platform through which the prod-
uct and all the software as a service (SaaS) and platform as a service (PaaS) are
generated and then pushed to end customers and other players in the greater
ecosystem.77 For example, in the ABB case, a digital platform is used to col-
lect data from products and make them available for the knowledge extraction
needed to provide high-value software-enabled services. This means that every
action/input starts and ends as a digital signal that assumes various meanings
based on the company’s business view. In particular, data platforms operate as
a place where data are collected from internal and external sources, enriched,
and made available through a structured and business-oriented data library. As a
result, data can be accessed by various areas of the business to create value either
through data mining and AI model experimentation or through data services
powering business applications and operations. For instance, CNH Industrial’s
data platform collects data from IoT devices and makes them available for analy-
ses and machine-learning model creation by internal data scientists and product
managers. Moreover, these platforms often collect end-user data, and must hence
be accurately governed and protected in compliance with law (i.e., General Data
Protection Regulation in Europe). Due to the confidentiality of the data, CNH
Industrial has developed specific encryption, while Vodafone has defined internal
policy and privacy guidelines to protect them.
People
Generally, digital transformation entails a thorough revision of the firm’s
operations and business models.78 However, when substantially revising the
activities and processes, new professional roles may be needed. On one side,
firms may define a new managing role to drive the transformation (e.g., Chief
Digital Officer);79 on the other side, employees may have to possess specific skills
and capabilities to fully seize the opportunities that digital technologies create.80
CNH Industrial, alongside the Microsoft professionals working on the transfor-
mation program, supported its data scientists in developing new methodologies
and programming competences. This was essential since the digital transforma-
tion project also pushed CNH Industrial to become a software developer and,
ultimately, adopt an open platform model providing and selling services to third
parties. Therefore, professional roles (such as digital advisors) and a new digital
team were created within the CNH Industrial’s existing IT organization to sup-
port the strategy implementation and execution. In the Vodafone case, the digital
transformation project compelled managers of the commercial operations unit to
enhance their employees’ capabilities. A call-center unit was trained to no longer
answer customer calls directly, but to design conversational frameworks for the
chatbot to be used in serving customer requests. In addition, these employees
CALIFORNIA MANAGEMENT REVIEW 62(4)48
were involved in training the conversational models to become more and more
accurate and relevant for the customers. They did this through a digital feedback
loop process of continuous improvement of the accuracy and relevance of con-
versations, based on customers’ experiences. Moreover, a neural network train-
ing unit was set up to enable operators to use the new intelligent system, which
resulted in new jobs and professions. In particular, the project required employ-
ees able to train AI and conversation designers. However, in the ABB case, the
approach did not impel employees to dramatically change their routines; in fact,
most were able to basically do the same work as before, but with new decision
support intelligence.
Partners
The digital transformation of companies may entail a radical change in their
core capabilities. In the CNH Industrial case, the company has evolved from offering
commercial vehicles to operating connected vehicles, therefore, requiring knowl-
edge and competences that differed significantly from the past. Defining agreements
with partners can support the organization in obtaining new data, capabilities,
knowledge, and competences that are crucial for the implementation of the digi-
tal transformation strategy.81 Partnerships can be established with several types of
stakeholders. ABB, CNH Industrial, and Vodafone all established a partnership with
Microsoft to develop the IT infrastructure needed to sustain the digital transforma-
tion of their business. Other partnerships can also be pursued over time to sup-
port the implementation of the digital transformation strategy. For instance, CNH
Industrial established partnerships with both companies and customers to obtain
insights on their products and collaborate by sharing anonymized data to enhance
AI models governing vehicles’ digital experience. ABB created partnerships with
stakeholders such as OEMs, distributors, and panel builders in order to improve its
offering and support the new service design and favoring the development of prod-
ucts’ core components. Previous studies have highlighted the role of partnerships
in assisting with the revision and implementation of novel firms’ digital strategies.82
The role of partners in our framework illustrates their connection with the other
building blocks supporting the implementation of a digital transformation strategy.
Artificial Intelligence (AI)
In the three cases presented, the data collected are used to develop and
test machine-learning models deployed for various purposes. Specifically,
Microsoft AI technologies were adopted within a rapid insight and data explo-
ration framework to ensure an agile approach to data discovery and value cre-
ation. To change the business model and organizational activities, lean analytics
and an AI operations framework are needed. In fact, “learn fast and fail fast” is
at the core of every approach to data and machine-learning model design and
experimentation. This approach is a key success factor that allows for developing
better solutions to existing problems, identifying new patterns in data that pro-
mote specific actions, inferring relevant knowledge, and promoting both radical
and incremental improvements in products and services.83 Therefore, a digital
business model should define the specific AI strategies and capabilities needed to
Implementing a Digital Strategy: Learning from the Experience of Three Digital Transformation Projects 49
transform data into information and, eventually, generate knowledge that can
be used to create value for customers. Typical examples of AI products are appli-
cations using computer vision, facial recognition, autonomous vehicles, virtual
agents, machine-learning models, natural language processing, artificial neural
networks, and big data analytics. In the three companies, machine learning is
currently the most relevant and diffused technique to obtain the most from data.
The relevance of the AI building block is a peculiarity of the digital context that
has not been fully unraveled in previous studies,84 however, it is of core impor-
tance in our analysis of the three companies.
Information and Knowledge
This building block involves the output of the data analysis. In the case
of ABB, the intelligence extracted by the data platform can help the company
and various stakeholders understand how customers use the products and how
the products affect the customers’ business (in business-to-business [B2B] rela-
tionships). This process is similar for service companies. In the CNH Industrial
case, data are taken from telematic and telemetry boxes (IoT devices) that are
then sent to the cloud where they are computed, cleaned, and modeled to be
subsequently forwarded to a control room that proactively uses them to globally
monitor all vehicles. Thanks to predictive maintenance models, the control room
can send alerts on the status of vehicles and understand how drivers interact
with the monitored vehicles. This allows CNH Industrial to provide a new service
to their first-party customers as well as to let them share information to their
third parties in the form of data-as-a-service. In the Vodafone case, data analy-
sis allows developing enhanced conversation models that result in reshaping the
customer care operations. Finally, the extracted information may be processed
to further increase individual and organizational knowledge. The importance of
this building block when implementing a digital transformation strategy has also
been partially neglected in previous literature on business models.85
Processes and Procedures
The implementation of a digital transformation strategy may require com-
panies to revise the processes and procedures they use to create value for cus-
tomers, since the changes involved could be radical.86 In fact, prior research and
our empirical evidence suggest that processes and procedures should be agile
and lean when dealing with digital transformation in order to allow the com-
pany to adapt to rapid change and seize emerging opportunities, thus emulat-
ing the behavior of startups rather than that of consolidated companies.87 In
addition, this building block can also involve the revision of the formal rela-
tionships among employees and the formation of dedicated business units. For
instance, in the ABB case, product managers drive the business idea through
the iterative development of minimum viable products to achieve quick wins.
In the CNH Industrial and Vodafone cases, a similar lean approach was found.
At CNH Industrial, the digital transformation project was carried out by adopt-
ing experimental and iterative approaches, lowering the barriers between devel-
opers and business owners, and thus allowing for real-time feedback cycles on
CALIFORNIA MANAGEMENT REVIEW 62(4)50
the scheduled work. These new processes and procedures supported the digital
transformation strategies through timely checks and refined implementation for
consistency with creating value for customers.
Transformed Activities, Tasks,
and Services
Digital companies use information and knowledge to perform core activi-
ties, tasks, and services that allow companies to directly create and appropriate
value and complementary activities, tasks, and services that support the execution
of the core ones.88 In the Vodafone case, the digital transformation had the objec-
tive of redefining the way the company listens to and understands end customers.
The information is used to train AI in customer care and provide cognitive ser-
vices. Along with the transformation of the core activities, the digital transforma-
tion also provided Vodafone with the opportunity to use the new and in-depth
knowledge about customers to offer personalized products and services. Similarly,
ABB exploits information and knowledge to tailor solutions and offer savings to
customers, execute predictive maintenance, and provide automatic reordering.
The digital transformation project also allowed ABB to offer accurate assistance
to customers as a complementary activity. Finally, CNH Industrial uses the infor-
mation and knowledge to improve activities (such as fleet management, failure
prediction, remote vehicle monitoring) and to enhance automation capabilities.
Customers
The last building block of our framework involves the customers for whom
the digital company creates value, and it has been strongly stressed in prior stud-
ies.89 We distinguish between existing and new customers for the digital transfor-
mation project. CNH Industrial strengthened its relationships with the existing
customer base as a result of their closer connection in the new business model,
aiming to make these relationships mutually more valuable. The availability of
new data and information also enabled new customer profiles to be addressed.
ABB added new customers to its existing base, such as OEMs and distributors.
Customers can be both internal and external to the company. Vodafone’s digital
transformation project, for example, is targeted at internal customers, such as
other Vodafone business units, and external customers, such as end users.
The framework’s building blocks resemble the business model elements
proposed in the literature.90 The framework (Figure 1) organizes and illustrates
the building blocks related to a firm’s value proposition and market segments as
the scope and the customers blocks. The central part of the framework (data, data
platform, AI, information and knowledge, people, and partners blocks) contains
the value chain structure of the digital business model. The transformed activities,
tasks, and services block represents the firm’s capability to extract rent from the
value created. Accordingly, this block is connected with the mechanisms used by
the firm to appropriate the value provided to the customers. Finally, the relation-
ships among the different elements are defined through the processes and proce-
dures block and by the structure itself of the framework. In the appendix, we
illustrate how the framework is applied to describe the three cases presented in
this study.
Implementing a Digital Strategy: Learning from the Experience of Three Digital Transformation Projects 51
Conclusion
To understand how digital transformation can be effectively implemented,
we have identified the building blocks underlying the implementation of a digi-
tal transformation strategy. Through the analysis of ABB, CNH Industrial, and
Vodafone, three companies that successfully undertook the digital transforma-
tion journey assisted by Microsoft, we constructed a framework that can sup-
port companies in digitally transforming their businesses and creating a strong
and consistent connection between strategy formulation and strategy implemen-
tation. More specifically, this framework serves as an actionable guide that can
help companies navigate the challenges associated with the implementation of
a digital transformation strategy. This process requires that companies rethink
and revamp their business models in order to reduce risk and uncertainty. In this
regard, our framework can serve as a checklist to ensure that none of the key
elements composing the strategy is neglected when senior executives engage in
digital strategy implementation.
Appendix
Here, we report on how the framework applied to the three cases analyzed: ABB
(Figure A1), CNH Industrial (Figure A2), and Vodafone (Figure A3).
FIgure a1. The framework applied to the ABB case.
Scope
-Op�mize
products
-Servi�za�on
Core
-Tailored
solu�ons to save
money
-Predic�ve
maintenance
-Automa�c
reorder
Complementary
-Assistance
Transformed
Ac�vi�es, Tasks,
and Services
Exis�ng
-End users
-Panel builders
New
-OEMs
-Distributors
Customers
Internal Data
Sources
-Sensors
-Customer
usage data
External
Data Sources
-Consultants
-Installers
Data
Pla�orm
-ABB digital
pla�orm
Ar�ficial
Intelligence
-Predic�on
models
-User behaviour
predictors
-Remote
troubleshoo�ng
Informa�on
and
Knowledge
-Assessment
of use
-Status
sensing
-System
sensing
People
Digital dream team; Digital advisors; PMs; R&D
Partners
OEMs; Distributors; Panel Builders; Technical presales; Microso�
Processes and Procedures
Lean/agile approach; Design thinking; Quick wins
Processes
and
Procedur
es
Processes
and
Procedures
Processes
and
Procedur
es
Processes
and
Procedures
Processes
and
Procedures
Note: OEMs = original equipment manufacturers; PMs = product managers; R&D = research and
development.
CALIFORNIA MANAGEMENT REVIEW 62(4)52
FIgure a2. The framework applied to the CNH Industrial case.
Scope
-Develop
unmanned and
autonomous fleet
Core
-Fleet
management
-Failure
predic�on
-Remote
monitoring
-Automa�on
capabili�es
Transformed
Ac�vi�es, Tasks,
and Services
Exis�ng
-Agricultural and
farming
companies
-Large retailers
New
-AgTech startups
Customers
Internal Data
Sources
-On board
sensors
External
Data Sources
-Terrain
maps
databases
-Seeds and
plants
databases
Data
Pla�orm
-Service
Delivery
Pla�orm
Ar�ficial
Intelligence
-Coordinated
vehicle
control
-Advanced
machine auto-
se�ng
-Cogni�on
Informa�on
and
Knowledge
-Environmental
sensing
-Fleet sensing
People
Digital team; Digital advisors
Partners
Insurance Companies; Customers; Tech startup; Governmental org.; Microso�
Processes and Procedures
Agile methodologies
Processes
and
Procedur
es
Processes
and
Procedur
es
Processes
and
Procedures
Processes
and
Procedures
Processes
and
Procedures
FIgure a3. The framework applied to the Vodafone case.
Scope
-Automate and
improve
customer care
Core
-Trained AI
-Cogni�ve
services
Complementary
-Personaliza�on
of products and
services
Transformed
Ac�vi�es, Tasks,
and Services
Exis�ng
-Users
New
-Vodafone
(internal
customers)
CustomersInternal Data
Sources
-Customer
interac�ons
-Internal
knowledge
repository
External
Data Sources
-Baseline
conversa�on
models
databases
Data
Pla�orm
-Omnichannel
customer
integrated
pla�orm
Ar�ficial
Intelligence
-Machine
learning
-Predic�ve
analy�cs
-Knowledge
management
intelligent
search
-Speech
recogni�on
Informa�on
and
Knowledge
-Enhanced
conversa�on
models
-Conversa�on
state
-Telemetry
People
AI Training Team; Conversa�on designers
Partners
Microso� (Cogni�ve data services)
Processes and Procedures
Efficiency/lean; Customer care effec�veness
Processes
and
Procedures
Processes
and
Procedures
Processes
and
Procedures
Author Biographies
Alessia Correani is a PhD in Cognitive Neuroscience, Birmingham University,
United Kingdom; Digital Advisor at Microsoft Consulting Services (Italy); and
Microsoft Corporate Artificial Intelligence (AI) Ambassador (email: alessia.
correani@microsoft.com).
mailto:alessia.correani@microsoft.com
mailto:alessia.correani@microsoft.com
Implementing a Digital Strategy: Learning from the Experience of Three Digital Transformation Projects 53
Alfredo De Massis is Professor of Entrepreneurship & Family Business and
Director of the Centre for Family Business Management at the Free University
of Bolzano (Italy) and is also affiliated with Lancaster University Management
School (United Kingdom) and as a Visiting Professor with Zhejiang University’s
Institute of Family Business (China) (email: alfredo.demassis@unibz.it).
Federico Frattini is Professor of Strategic Management and Innovation at Politecnico
di Milano and Dean of MIP, the Graduate School of Business of Politecnico di Milano
(Italy) (email: federico.frattini@polimi.it).
Antonio Messeni Petruzzelli is Professor of Innovation Management at
Politecnico di Bari (Italy) (email: antonio.messenipetruzzelli@poliba.it).
Angelo Natalicchio is a Postdoctoral Research Fellow in Innovation Management at
Politecnico di Bari (Italy) (email: angelo.natalicchio@poliba.it).
Notes
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2. Hajar Fatorachian and Hadi Kazemi, “A Critical Investigation of Industry 4.0 in
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Are Revolutionizing Business,” Harvard Business Review, 92/11 (November 2014): 90-99;
Federico Pigni, Gabriele Piccoli, and Richard Watson, “Digital Data Streams: Creating Value
from the Real-Time Flow of Big Data,” California Management Review, 58/3 (Spring 2016):
5-25; Karl S. R. Warner and Maximilian Wäger, “Building Dynamic Capabilities for Digital
Transformation: An Ongoing Process of Strategic Renewal,” Long Range Planning, 52/3 (June
2019): 326-349.
4. Satish Nambisan, “Digital Entrepreneurship: Toward a Digital Technology Perspective
of Entrepreneurship,” Entrepreneurship: Theory and Practice, 41/6 (November 2017):
1029-1055.
5. Gianvito Lanzolla and Jamie Anderson, “The Digital Revolution Is Over. Long Live the
Digital Revolution!” Business Strategy Review, 21/1 (Spring 2010): 74-77.
6. Pigni et al., op. cit.
7. Volker Tresp, J. Marc Overhage, Markus Bundschus, Shahrooz Rabizadeh, Peter A. Fasching,
and Shipeng Yu, “Going Digital: A Survey on Digitalization and Large-Scale Data Analytics
in Healthcare,” Proceedings of the Institute of Electrical and Electronics Engineers (IEEE), 104/11
(November 2016): 2180-2206.
8. Andrea Urbinati, Davide Chiaroni, Vittorio Chiesa, and Federico Frattini, “The Role of Digital
Technologies in Open Innovation Processes: An Exploratory Multiple Case Study Analysis,” R&D
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9. Nambisan, op. cit.
10. Ibid.
11. Pigni et al., op. cit.
12. Carmelo Cennamo and Juan Santaló, “How to Avoid Platform Traps,” Sloan Management Review,
57/1 (Fall 2015): 12-17; Thomas H. Davenport and George Westerman, “Why So Many High-Profile
Digital Transformations Fail,” Harvard Business Review Digital Articles, March 9, 2018, https://hbr.
org/2018/03/why-so-many-high-profile-digital-transformations-fail; Gerald C. Kane, Doug Palmer,
Anh Ngueyn Phillips, David Kiron, and Natasha Buckley, “Strategy, Not Technology, Drives Digital
Transformation,” MIT Sloan Management Review and Deloitte University Press, July 14, 2015, https://
sloanreview.mit.edu/projects/strategy-drives-digital-transformation/.
mailto:federico.frattini@polimi.it
mailto:angelo.natalicchio@poliba.it
https://hbr.org/2018/03/why-so-many-high-profile-digital-transformations-fail
https://hbr.org/2018/03/why-so-many-high-profile-digital-transformations-fail
https://sloanreview.mit.edu/projects/strategy-drives-digital-transformation/
https://sloanreview.mit.edu/projects/strategy-drives-digital-transformation/
CALIFORNIA MANAGEMENT REVIEW 62(4)54
13. Barry Libert, Megan Beck, and Yoram Wind, “7 Questions to Ask before Your Next
Digital Transformation,” Harvard Business Review Digital Articles, July 14, 2016, https://hbr.
org/2016/07/7-questions-to-ask-before-your-next-digital-transformation#.
14. Michael Beer and Russel A. Eisenstat, “The Silent Killer of Strategy Implementation and
Learning,” MIT Sloan Management Review, 41/4 (Summer 2000): 29-40; Victoria L. Crittenden
and William F. Crittenden, “Building a Capable Organization: The Eight Levers of Strategy
Implementation,” Business Horizons, 51/4 (July 2008): 301-309; Simon Chanias, Michael
D. Myers, and Thomas Hess, “Digital Transformation Strategy Making in Pre-Digital
Organizations: The Case of a Financial Services Provider,” Journal of Strategic Information
Systems, 28/1 (March 2019): 17-33.
15. Charles H. Noble, “The Eclectic Roots of Strategy Implementation Research,” Journal of
Business Research, 45/2 (June 1999): 119-134; Xavier Gimbert, Josep Bisbe, and Xavier
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Processes,” Long Range Planning, 43/4 (August 2010): 477-197; Frank T. Rothaermel, Strategic
Management, 3rd ed. (New York, NY: McGraw Hill, 2017).
16. Rothaermel, op. cit.
17. For example, see Rainer Feurer, Kazem Chaharbaghi, and John Wargin, “Analysis of Strategy
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4-16; Rony Dayan, Peter Heisig, and Florinda Matos, “Knowledge Management as a Factor
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18. Beer and Eisenstat, op. cit.; Crittenden and Crittenden, op. cit.
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20. Chanias et al., op. cit.
21. Lee and Puranam, op. cit.
22. Greer et al., op. cit.
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longform/ge-decline-what-the-hell-happened/.
24. Ibid.
25. Beer and Eisenstat, op. cit.; Crittenden and Crittenden, op. cit.; Lee and Puranam, op. cit.;
Greer et al., op. cit.
26. James Richardson, “The Business Model: An Integrative Framework for Strategy Execution,”
Strategic Change, 17/5-6 (August 2008): 133-144; Ramon Casadesus-Masanell and Joan Enric
Ricart, “From Strategy to Business Models and onto Tactics,” Long Range Planning, 43/2-3
(April-June 2010): 195-215.
27. Kurt Matzler, Stephan Friedrich von den Eichen, Markus Anschober, and Thomas Kohler,
“The Crusade of Digital Disruption,” Journal of Business Strategy, 39/6 (2018): 13-20.
28. Iansiti and Lakhani, op. cit.
29. Rothaermel, op. cit.; David J. Teece, “Business Models and Dynamic Capabilities,” Long Range
Planning, 51/1 (February 2018): 40-49.
30. Erik Brynjolfsson and Andrew McAfee, “Winning the Race with Ever-Smarter Machines,”
MIT Sloan Management Review, 53/2 (Winter 2012): 53-60. René Ceipek, Julia Hautz, Antonio
Messeni Petruzzeli, Alfredo De Massis, Kurt Matzler, “A motivation and ability perspective
on engagement in emerging digital technologies: The case of Internet of Things solutions,”
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31. Davenport and Westerman, op cit.
32. Marc de Swaan Arons, Frank van den Driest, and Keith Weed, “The Ultimate Marketing Machine,”
Harvard Business Review, 92/7-8 (July/August 2014): 54-63.
33. Ibid.
34. George Westerman, Didier Bonnet, and Andrew McAfee, Leading Digital: Turning Technology
into Business Transformation (Boston, MA: Harvard Business Review Press, 2014).
35. Davenport and Westerman, op. cit.
36. Mike Wilson, “Nike’s Big Bet on the Future of Connected Shoes,” Fast Company,
January 15, 2019, https://www.fastcompany.com/90291303/nikes-big-bet-on-the-future-of
-connected-shoes.
https://hbr.org/2016/07/7-questions-to-ask-before-your-next-digital-transformation#
https://hbr.org/2016/07/7-questions-to-ask-before-your-next-digital-transformation#
http://fortune.com/longform/ge-decline-what-the-hell-happened/
http://fortune.com/longform/ge-decline-what-the-hell-happened/
https://www.fastcompany.com/90291303/nikes-big-bet-on-the-future-of-connected-shoes
https://www.fastcompany.com/90291303/nikes-big-bet-on-the-future-of-connected-shoes
Implementing a Digital Strategy: Learning from the Experience of Three Digital Transformation Projects 55
37. Kane et al., op. cit.; Thomas Hess, Christian Matt, Alexander Benlian, and Florian Weisböck,
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(2016): 123-139; Morteza Ghobakhloo, “The Future of Manufacturing Industry: A Strategic
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38. Casadesus-Masanell and Ricart, op. cit.
39. Warner and Wäger, op. cit.
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41. Casadesus-Masanell and Ricart, op. cit.
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46. Richardson, op. cit.
47. Teece, op. cit.
48. Iansiti and Lakhani, op. cit.
49. Saebi et al., op. cit.
50. Nambisan, op. cit.
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52. Iansiti and Lakhani, op. cit.
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60. van de Ven, op. cit.
61. Foss and Saebi, op. cit.; Saebi et al., op. cit.
62. Eisenhardt, op. cit.
63. Foss and Saebi, op. cit.; Saebi et al., op. cit.
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CALIFORNIA MANAGEMENT REVIEW 62(4)56
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78. Lanzolla and Anderson (2008), op. cit.
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81. Iansiti and Lakhani, op. cit.
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86. Günther et al., op. cit.
87. Matzler et al., op. cit.
88. Teece, op. cit.
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https://hbr.org/2017/08/a-survey-of-3000-executives-reveals-how-businesses-succeed-with-ai
https://hbr.org/2017/08/a-survey-of-3000-executives-reveals-how-businesses-succeed-with-ai
https://hbr.org/2017/01/what-the-companies-on-the-right-side-of-the-digital-business-divide-have-in-common
https://hbr.org/2017/01/what-the-companies-on-the-right-side-of-the-digital-business-divide-have-in-common
https://www.gartner.com/smarterwithgartner/5-ways-data-science-and-machine-learning-impact-business/
https://www.gartner.com/smarterwithgartner/5-ways-data-science-and-machine-learning-impact-business/
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