Insights | By Howard Tiersky

Most Companies Don't Fully Embrace Digital Transformation

Most enterprises today are thinking about some level of "Digital Transformation"; however, the majority aren't thinking about the full depth and breadth of the transformation necessary to compete effectively in our digital world.

In fact, Digital Transformation is made up of four completely different business areas of transformation. All four are essential to effectiveness. Most enterprises are not approaching these four areas in a coordinated way, and in many cases, they are focusing on only one or two of them.

Consider your company's Digital Transformation. How robust and coordinated are the four areas of digital transformation outlined below?

 Digital Customer Experience Transformation
 
This tends to come to mind first when we think of Digital Transformation. And indeed this is where the rubber meets the road. Consumers today expect a seamless digital journey as they interact with your brand, from consideration through utilization of your product or service and beyond. Companies that are succeeding with customer experience transformation provide an array of digital touchpoints which operate in a unified and consistent manner and provide comprehensive content and functionality. The exact nature of the journey will vary by industry and brand of course, but here's a good litmus test – can a customer have an outstanding experience with your brand without ever speaking to or interacting with a human being? Or if a portion of your value proposition relies on human interaction (such as a doctor) is that human fully "digitally empowered" to recognize the customer based on their history and profile? In other words, is your company set up to fully leverage digital capabilities to maximize the quality of each customer encounter? Most companies are still working on reaching this "north star," but those companies that have a long way to go risk continued loss of brand relevance in favor of brands that are digitally savvy.
 
Most enterprises are increasingly aware when they have substantial gaps in this area, because of customer complaints and the impact on sales. However, because a big change is complex, many focus on incremental changes to what are outdated customer journeys, as this is more "achievable" than the large-scale re-think that may truly be necessary. Those enterprises that manage to optimize the current state while simultaneously boldly envisioning and begin taking steps toward a digitally-centric future now will be the ones who win in the future.

While most companies have an awareness that as they conceive a new type of customer journey they will need to upgrade their technology, they often underestimate the degree of transformation that will be needed

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Technology Transformation

Technology is an essential enabler, and the lack of the right technology can be an impenetrable barrier to success even for the smartest digital marketers and product developers. Of course, even the best technology in the world will not create, in and of itself, the type of seamless digital journeys that customers expect.  

There are three key pillars of technology transformation:

  • Systems: From content management to transaction processing to authentication and security, building and maintaining an effective, scalable and flexible technology stack to handle your customer's constant digital interactions is clearly foundational.
  • Data: The core of a great digital journey is based on data – primarily about the customer and your products or services. Having the right processes for collecting data, keeping it clean, making it accessible and analyzing it to generate actionable meaning is also an essential competency for digital success.
  • SDLC Processes: The software which drives the way your customers interact with your business needs to evolve at a rapid rate and in lock-step response to changes in devices, consumer behavior, your business' offerings, and new platforms as they emerge and become popular. Successful digital companies have processes that allow them to develop new capabilities continuously and deploy them very regularly. For example, Facebook deploys new code many times each day. Companies still working off processes that require weeks or months between releases for full testing and deployment processes are way behind the curve.

While most companies have an awareness that as they conceive a new type of customer journey they will need to upgrade their technology, they often underestimate the degree of transformation that will be needed, and their progress toward change is too slow to keep up with competitors who were built "from scratch" on flexible, modern architectures.
 
Business Process Transformation

When you are running a truly digital customer journey sitting on an effective technology platform, you can't expect to operate your business the way you did in the "pre-digital" days. And adding a "digital" team is not enough. Digitally transformed companies are not only leveraging digital tools in everything they do internally, but they are optimizing their products and services for a digital world. This means changing the way we do everything – including understanding our customers, designing and building products and services, recruiting, customer service, and performance management. The fundamental realities of marketing in a digital world require very different skills than were needed "back in the day," and as the composition of work and skills in any team shifts substantially, it requires a re-think on how the team is structured and managed.

This is an area many companies overlook or deal with in an ad hoc manner. Sure, it was clear that as social media became more important, at some point most enterprises brought in talent with these skills and managers to oversee them. Yet, many companies have not really stepped back and re-considered their broader organizational model in the context of a digital world. Ultimately it will be your people who implement, optimize and continually innovate your digital customer journey. Getting this right is arguably the first priority, although it's often dealt with after the fact and in as limited a way as the organization feels it can get away with.

Business Model Transformation

Google invented their own business model and now sells more advertising than any other media company in the world. Uber created the world's largest car service fleet without purchasing any vehicles. Apple created a model for software development on the iPhone which gave them a healthy percentage of the sales of every app sold for their device – a notion unheard of in computing before. While you may not need to invent a whole new business model, it's unlikely that you will make money in the emerging digital world in the same way you do today. Look at Adobe, who, over the course of several years, very successfully shifted from selling PhotoShop and other design software as packaged software to software subscriptions. Their actual products are still software you download and run on your computer, but they are paid for on an annual subscription basis and generate far more revenue than they did in the "buy it once, pay for an upgrade if you want one " model, which they no longer offer at all. Amazon has taken their Prime service from a shipping subscription to a broad membership offering an array of benefits from media on demand to product discounts and more.
 
Most companies are, frankly, not bold enough to make a dramatic change to their business model, even when revenues are declining. Often the new business model opportunities are not going to provide more revenue at the start. In fact the trend in our digital world is for companies to provide more and more value for less and less money. It started with technology and bandwidth where we learned that services improved quickly, and associated costs still went down.  Skype provides long distance calling for a penny a minute. Google provides a complete office suite for free or a few dollars a month. Amazon and other leading e-commerce players succeed in part via price transparency and discounting. This is of course one of the reasons why companies need to innovate their business process transformation. To compete in many areas they have to be able to offer more value for less money. Uber's digitally enabled business model allows them to undercut taxis and car services in most markets, and improve customer experience, creating a crisis for legacy businesses. But it's in some ways easier for a new entrant like Uber to come along at a new price point than it is for an existing business with legacy costs to dramatically lower their price point. And in some cases, like Adobe, it may not always be about collecting less money but instead about restructuring how you collect it (via subscription for example). Or consider Amazon's Kindle which sells a subsidized version of a physical product if the consumer will accept advertising on their ebook reader. The digital leaders are not suffering financially, but they are benefitting from both a digital customer journey, supported by modern and flexible technology and development processes, and digitally-optimized business processes which sit on top of business models that provide more value to the customer.
 
Yes, it may be unfair that companies from the "pre-digital" age have to figure out how to "get there" when companies like Google and Zappos were "born there." That’s why past waves of transformation killed off so many companies, whether it was the industrial revolution, modern inventions in transportation, and communication like the internet, but as technology changed so did companies the potential for company’s success if they were willing to transform to meet the new world.