By 2020 every business will either be a digital predator or a digital prey. It is 2017 and most organizations are undergoing some form of digital transformation. The question is how successful are these projects? Especially when you are dealing with legacy systems, outdated business models and a culture resistant to change.
While it is easy to gain efficiencies from one-off projects on digital, how can you utilize it for growth and profitability?
According to MIT and Accenture, Digital maturity equals 29% more profitability, 9% more growth and 9% higher market valuations.
Digital transformation touches many aspects of your business – technology, processes, skills, operations etc. But the crux of your success depends on changing the fundamental way you do business. This is due to heightened expectations of customers due to digital businesses we are all familiar with like AirBnB, Uber, Netflix, Amazon etc.
The issue then is not about what projects to invest in but how to have an overall impact on your business. We recommend adopting a strategy that addresses common challenges most digital transformation projects face.
1. Change Although change can start anywhere in an organization, the drivers for a digital transformation project should be the C-suite. A top down approach will help with the change in business models, organization culture and most importantly investment in the right opportunities. The % of CEOs who champion digital has increased to 68% in 2017 from 33% in 2007! By starting at the top, a vision is formulated taking into account the impact across the organization.
According to McKinsey "To make a digital transformation happen, you need complete alignment—from the board through the executive team through the whole organization. Without that “air cover” from the board and from shareholders who understand the change that you’re taking the organization through, it is very, very hard to do it successfully.”
Once the leadership team is clear with the vision, the message can be clearly and openly articulated across the organization. A sense of urgency has to be conveyed to the mid-management, since they hold the resigns of execution.
Less push and more passion is the secret to the organization’s adoption of digital transformation.
2. Business Strategy / Business Models You would be surprised to know that Kodak’s downfall was not lack of latest technology; it died due to lack of appropriate business model. They purchased a photo sharing site called Ofoto in 2001 but instead of utilizing it to share photos and memories, they tried to get more people to print digital images.
Bolting digital on top of what you currently have is easier than seeking new and alternate strategies for your business. This is daunting if you don’t know where to start. Looking at competition, digital trends and assessing where you are on the Social, mobile, analytics and cloud spectrum would be the beginning of this long journey. “Ten years ago, innovation was based on features and functions,” says William Ruh, chief digital officer at GE. “ Now it's about your business model and transforming your industry"
The focus of digital transformation can fall under three categories 1. Enhancing the core of your current business 2. Finding new and adjacent business models and 3. Introducing disruptive products. Depending on your appetite for risk, any or all of these aspects can be used to transform your business. The key is in striking the right balance between reinventing but not “throwing all out” approach.
3.Prioritization:Since digital transformation is a vast area requiring additional skills and resources, it would be important to prioritize what areas of the business you want to tackle first - e.g., Do you want to increase customer engagement on social media? Or would you like to launch a new product using machine learning? Are you thinking of utilizing predictive analytics to increase revenue?
Listening to your current customers - on social media, on your app store, your customer service department as well other channels - will give you an idea of some of the quick wins. For example, when a flight is canceled, Delta Air Lines provides re-routing information on customers’ mobile app.
By focusing on the outcomes rather than the technologies, you can be assured of a successful transformation.
The question then is what about other projects in flight? Figuring out if there is any impact to those programs and folding them into the digital transformation project will make sure there is no duplication of efforts.
First, getting quick wins out of the door will boost the confidence and momentum of the digital transformation project. Secondly, launching a new business initiative can bring in additional revenue. Thirdly, tightening the entire end-to-end cycle from sales to operations would keep the ball rolling on accepting digital as a way of life for years to come.
4.Key metrics You can't manage what you can't measure. Digital initiatives need a new set of metrics to keep track of your success. You would now be measuring your customer engagement and sentiment, your network in the eco-systems, adoption rates in addition to revenue and growth. Additional metrics are customer centric like Net Promoter Score, customer lifetime value and customer satisfaction index. An example of networks in your eco-system is the number of Uber drivers or the number of property owners for Airbnb.
Too often metrics can be a nightmare as they might reside across complex cross-channel interactions. Clearly stating the KPIs at the onset of the project and monitoring it along the way will derive maximum value from the digital transformation initiatives.
An advantage of adopting digital is that you can utilize these metrics to boost customer engagement and revenue growth further. For e.g., the customer data can be used to drive new marketing and sales campaigns on channels that you have maximum engagement. You can also utilize it to drive strategic direction like improving your online and mobile presence.
Digital transformation is more than changing your strategy, technology or processes. It is about embracing change culturally and rethinking the way you do business. The successful organizations have managed to overcome the barriers of mapping the digital customer needs to growth opportunities in their business.
The truth is that most organizations are still undergoing this journey and learning as they go along. The ones who manage to overcome the above challenges are the ones moving the needle in the right direction.