Digital transformation is revolutionising the way we live and work; it’s opening up a wide range of possibilities for companies, their customers, and their employees. But only if they understand them within the proper context.
In a world where the consumer is king, companies need to up their game. They need to provide superior customer experiences, and they need to do it consistently.
Digital transformation, within the wider context of business transformation, is not a new concept. Disruptive ideas and have been around since the dawn of history, and companies have always sought to adapt. But the sheer pace of change makes digital transformation unique. The possibilities for innovation, scalability, and agility are endless.
Digital transformation is really about using new technology to solve old problems. And companies have always been concerned with delivering exceptional customer value.
It involves every area of the company, not just IT. An enterprise-wide effort is needed to change business and operating models. Vast amounts of data need to be collected to improve outcomes. Organisations that implement digital tools enterprise-wide are twice more successful than organisations that don’t (McKinsey).
Blind adherence to business plans no longer delivers. Companies need to be adaptable in the face of unforeseen events. Digital technologies such as Big Data Analytics, Artificial Intelligence (AI), Machine Learning (ML), Internet of Things (IoT) and other technologies enable companies to extract exponential value from vast amounts of customer and economic data.
Digital transformation entails a radical change in culture. A shift away from traditional departmental silos to enterprise-wide collaboration. Technology develops with customer behaviour, and company cultures need to adapt as well.
Unfortunately, it’s this cultural change which makes digital transformation difficult; only 20% of business leaders report success.
However, successful digital transformation projects are not impossible. Many companies have done it. In this article, we’ll explore what digital transformation is, what drives digital transformation, and what key elements make for a successful deployment.
Making sense of digital transformation
Digital transformation is a complete transformation of the organisation underpinned by digital technologies. It’s not digitisation, which are initiatives to digitise legacy systems.
It’s a complete re-assessment from the inside out, with an evaluation of how digital technologies improve outcomes for customers and stakeholders. It’s a cultural shift that embraces experimentation, challenges assumptions and embraces failure.
It seems certain that digital transformation is critical to the survival of modern companies. Although most companies understand the benefits of digital transformation, it’s a challenge to figure out what digital transformation means for them:
- What’s the framework for a digital transformation?
- Does it mean moving to the cloud?
- What job roles do I need?
Although 87% of business leaders recognise it’s a priority, only 40% of organisations have brought it to scale. Whatever the case may be, business leaders agree that digital transformation must place the customer first; a data-driven business model that integrates all areas of the organisation and improves the customer experience.
Why digital transformation matters
According to IDC, direct investment in digital transformation will grow by 15.5% annually between 2020 and 2023, reaching some $6.3tn. And for good reason. Companies realise they need to adapt to fluctuating market conditions with diligence. The coronavirus pandemic showed the need to react to supply chain disruptions quickly.
Amazon was, of course, an early adopter of digital technologies in retail; They understood it’s a cost-effective way to give customers what they want; it quickly showed its dominance of the retail sector during the pandemic.
Companies waking up to this reality are finding out they must merge technology with strategy. Big data analytics and other technologies provide companies with mission-critical information to make better decisions.
What drives digital transformation?
Technology is, of course, a key driver of digital transformation initiatives. Companies have been seeking to use technology to mitigate threats for years. Retailers, for example, have sought to enhance their supply chains and logistics in the face of Amazon’s dominance.
Digital transformation is, however, about more than technology. It’s about transforming cultures and processes. Culture and processes drive outcomes. Outcomes aren’t created in a void. Even the most disruptive technologies cannot deliver that.
There are three primary drivers of digital transformation:
This is hardly surprising. However, the pace of change is quickening. Disruptive technologies like Artificial Intelligence (AI), Internet of Things (IoT), Virtual and Augmented Reality (AR/VR) and Distributed Ledger Technology (DLT) such as Blockchain are driving innovation. Their disruptive potential is further enhanced with the convergence of technologies, such as AI with Big Data Analytics.
Legacy solutions are a limiting factor in the adoption of disruptive technologies because of their inflexibility and heavy technological footprint (databases, architectures). Newer technologies tend to be built around cloud architectures, thus limiting the opportunities available from legacy solutions.
As more legacy systems are replaced, companies can devote more time to implementing these disruptive technologies. Automation helps many organisations reduce their legacy footprint, quickening the pace of digitalisation.
With their increasing use of technology, customer expectations have changed. The modern consumer expects to order their goods and services from the comfort of their smartphones or laptops and have them delivered on time.
Digital technologies enable ease of use and convenience. Modern consumers expect personalised customer experiences at every touch point in their buying journey.
Transformation implies innovation. Technological innovation is one half of this equation. Cultural innovation is the other. Innovation has always figured at the heart of human and economic challenges. This emphasises that transformation is an enterprise-wide effort.
Digital transformation challenges
According to McKinsey, 70% of large-scale transformation programs don’t achieve their objectives. Companies are introducing new ways of working, aiming to drive long-term sustainable value.
Most organisations don’t have an issue with the ‘why’ of digital transformation. Difficulties arise when they try to translate those ideas into actionable items. Causes include:
- Ineffective leadership
- Lack of employee engagement
- Difficulty finding skilled staff
- Difficulty proving ROI
- Data and privacy concerns
Further, many companies confuse digital transformation with technological transformation, failing to appreciate the business drivers. When the business owns the transformation process, true transformation is possible. This includes people, processes, policies, and technology. It’s important that technology supports business objectives.
Another important challenge is managing expectations. The pressure to cut costs and drive efficiencies is causing many business leaders to view digital as the solution to all their problems. Although digitalisation can be the answer to many problems, it’s only effective when understood within its proper context.
Key digital transformation roles
Team members who understand your business and digital technologies are essential to the success of your digital transformation initiatives – 70% of business leaders report that the most significant changes occurred when digitally fluent leaders joined their organisation.
Successful teams need a range of experience across several disciplines, and in-depth knowledge in a few. Business, technology and process expertise drive these teams.
Successful teams comprise:
- Data architects that understand how to structure large amounts of data to develop Artificial Intelligence (AI) and Machine Learning (ML) algorithms.
- Software and cloud engineers that leverage agile software development methodologies such as DevOps to speed the delivery of products and services.
- UX designers and writers that take ownership of human-centric design elements and improve the customer experience.
- Compliance and digital culture officers that smooth the cultural change process.
Further, the C-suite provides strategic leadership. This includes the Chief Information Officer, Chief Finance Officer, and Chief Digital Officer. Some organisations may also find a role for a Chief Transformation Officer or a Chief Innovation Officer.
Getting started with digital transformation
Digital transformation is unique to your organisation. It follows your individual needs and challenges. There are, however, some common frameworks which successful organisations have followed. These include:
- Cultural innovation
- Employee engagement
- Customer focus
- Digital technology
- Data privacy
- Continuous improvement
Although it’s only to be expected that IT will lead your digital transformation strategy, a successful rollout is a company-wide effort.
Digital transformation requires a change of culture; From a culture of siloed departments to one embracing inter-departmental collaboration and new ways of working.
Thus, IT becomes a profit centre and is expected to generate revenue by improving processes, as well as developing innovative products and services.
Transparency and communication are essential to keep your employees and stakeholders engaged and ready to embrace change. It’s important that everyone understands the reasons for change and their individual roles in the future success of the organisation.
Resistance to change is natural. But many digital transformation programmes flounder for lack of employee support. We’re creatures of habit, we can’t help it. People often struggle with change, even if they see the benefit.
During times of upheaval and change, we need strong transformational leadership. A transformational leader is somebody who can make every employee feel secure and valued, who inspires everyone to act in the face of challenges.
As mentioned, cultural change is inevitable. Your leaders need to first assess the current state of your company culture to understand what needs changing. Think about how you can organise your teams so they’re prepared for the changes that are coming. At a minimum, your team members must be willing to embrace change.
Once your organisation has decided on its course of action, it’s time to get everyone on board. After all, a transformation program is only as effective as the people it affects. And if your employees aren’t on board, your initiative is destined for failure.
Organisations that empower employees to bring their own ideas to the table are 1.4 times more likely to report success. This can be achieved through rapid implementation whilst allowing everyone to learn from their mistakes.
Everyone should be made to feel as part of the solution, rather than part of the problem. Supplying your employees with consumer-grade technologies further empowers them to provide your customers with a top-grade consumer experience.
A customer-focused digital transformation initiative generates economic gains in the 20-50% range of the cost base, according to McKinsey. The most successful companies focus on maximising their customer value. There’s only so much you can do with product development. But you can derive more value when you lead your product development with customer needs.
Digital transformation helps you address and mitigate the many issues your customers face. This naturally entails a strong understanding of your customers’ needs and gives your transformation strategy a clear path to follow. In fact, be clear about your customer needs even before starting your digital transformation journey.
Personalisation – 84% of customers say being treated like a person, not a number, is very important to winning their business (Salesforce.com). With the increasing pace of digitalisation, customers expect a personalised service along every step of their customer journey.
Capturing and organising accurate customer data is critical. Research the many marketing automation tools available. A well-built marketing technology stack will help you capture, organise and analyse your customer data for better decision-making. More specialised Customer Data Platforms can help you capture customer data from a range of sources and unify them into individual customer profiles.
Content Marketing – Personalisation works hand-in-glove with content. It’s personalised content your customers expect from you, online and offline. Online this takes the form of videos, white papers, blog articles, infographics and the like. A solid content marketing plan will help you create and deliver content for every step of your customer’s buying journey; from the point they first come into contact with your brand to the point they become customers, and beyond.
Product/Service Delivery – Digital transformation means rethinking how you deliver your products and services; Indeed, even how you develop these products and services. This means revisiting every step of the value creation chain. This also means agile product development and delivery. If you are delivering physical products, you will need to focus on your logistics and supply chain.
Ultimately, your customers expect their products and services delivered where there they need them and on time. Improving your processes and increasing efficiency, while maintaining an exceptional customer experience, improves customer retention and improves the bottom line.
Clearly, technology has a role to play in your digital transformation project. You’ve laid the groundwork. Now it’s time to roll out. And rolling out a piece of complex technology is, well, technical.
However skilled your team, external technology partners with experience in the technology can help point out blind spots and help you avoid expensive mistakes.
It’s a good idea to have every department engage with your partners to ensure the knowledge shared has the most impact, and that everyone is on board with the changes to come.
Companies often implement digital transformation technologies in combination to meet their business objectives. These include Big Data, Artificial Intelligence (AI) and Machine Learning (ML), Augmented Reality (AR), Internet of Things (IoT), Robotics and Blockchain.
As mentioned earlier, collecting and organising accurate customer data is vital to your digital transformation project. But with 84% of consumers saying they want more privacy over how their data is used, and 48% of consumers saying they stopped buying from a company over privacy concerns, data privacy needs to be at the centre of your digital transformation strategy.
A streamlined data strategy across every area of your organisation is key to your success. Your data will provide vital feedback on your progress; 70% of organisations say they receive significant business benefits from investing in privacy. Your customers take their data seriously, and so should you.
Feedback and monitoring
Digital transformation is a journey, not a destination. Its goal is to streamline workflows and processes for employees and stakeholders, and improve the customer experience. In that regard, feedback from your employees and customers is vital.
Employees act as internal customers. They can provide feedback on how the digital transformation is being received both within and without the organisation. Happier employees likely make happier customers.
Feedback from your external customers is equally valuable, but they cannot provide a perspective on your internal processes. They can only experience their effects from the outside.
Digital transformation is a vast subject covering every aspect of your organisation’s culture and processes. Even defining digital transformation is an enormous challenge. Different organisations have their own definitions, even within the same organisation. But one thing’s for certain. It is more than a transformation in technology, it’s a cultural transformation which is happening within corporate organisations and society at large. As digital transformation gathers pace, we should all begin to see tangible benefits in our lives at home and at work.
Digital technologies are levelling the playing field in every vertical. For businesses that want to remain competitive, differentiation is leaning more and more towards the digital customer experience. It doesn’t matter anymore that you are a large retailer or a one shop enterprise. Your customer expects to order their goods conveniently, from the comfort of their laptops and smartphones, and have them delivered to their doorstep on time.
Digital transformation offers organisations of all sizes a unique opportunity to engage the modern consumer wherever they happen to be, be it online, offline, at home, in the office or on social media.
Despite the many promises of digital transformation, questions still remain: What exactly is digital transformation? And how do we go about implementing it?
Disruptive technologies like Artificial Intelligence (AI), Machine Learning (ML) and Internet of Things (IoT) have raised the bar high for companies, and consumers expect more from their brands – 32% of consumers say they would walk away from a brand after just a single bad experience.
However attractive digital transformation is as a buzzword, the first challenge for brands is to figure out what it means for them and their customers. It may mean more apps in the cloud for some, big data analytics for others or just plain working electronically instead of paper.
Whatever the case may be, surely it makes sense to start with understanding who the customer is and what they want to achieve. We’ll then outline 3 ways digital transformation is driving the customer experience.
Understanding the digital customer
The proliferation of apps and mobile devices has woken the modern consumer to the possibilities of using digital technologies. Modern consumers have become so invested in technology they increasingly judge brands based purely on their digital customer experiences. They demand meaningful interactions based on their personal choices and behaviours. They expect personalised content based on their interests.
A fundamental change of mind-set focusing on the customer, along with operational and IT improvements, can generate a 20 to 30 percent uplift in customer satisfaction, a 10 to 20 percent improvement in employee satisfaction, and economic gains ranging from 20 to 50 percent of the cost base addressed in the various journeys (McKinsey)
By and large, brands are following suit and adapting their operating models to embrace these new realities. Businesses responding to customer demands is, of course, nothing new. But the pace of change is quickening. Businesses are scrambling to extract value from the huge volumes of data available to them.
Improved internal processes
Delivering a better customer experience through digital transformation is not a job just for the front office. It’s the responsibility of the whole organisation to deliver on that promise. Ultimately, every department should aim to work towards providing a frictionless customer experience. The most successful organisations mandate cross-functional collaboration.
As far as your customers are concerned, you are one organisation. They expect their concerns to be addressed by customer service and shared with the entire team.
The challenge is organisations often operate in silos, and it can be challenging to collaborate effectively across departments. True to form, digital technologies are the solution to that challenge.
This often entails:
- Automating manual processes
- Eliminating unnecessary processes
- Evaluating how different teams work
All this is done with a view to improving and speeding up internal workflows. And customers benefit in two ways:
- Customer issues get shared more quickly between departments
- Customer issues are addressed at the root
Digital technologies help brands deliver a consistent customer experience in all their interactions.
Personalised customer experiences
75% of consumers are more likely to buy from brands that recognise them by name, recommend them products based on purchase history or remember their purchase history.
The digital consumer expects to be treated as an individual. This is why it’s critical for companies to collect extensive customer data, without which personalising the customer experience is impossible. In fact, 80% of consumers are happy for brands to collect their data, as long as they’re transparent about how they collect that data, and as long as they remain in control of their data.
Consumers expect their brands to be fully aware of their preferences based on previous interactions.
A Customer Relationship Management (CRM) tool is a natural place to start. It’s an efficient way to gather and share customer information across the organisation. Organisations can analyse data based on previous interactions, such as quotes and support requests.
They can also create targeted advertising and messaging based on this. Digital technologies help them extract and derive value from their customer data.
Personalised customer journeys
Today’s consumer isn’t tied to a single channel of communication. They browse from their smartphones, ask questions in-store, complete their purchases from their laptops and provide feedback on social media; 83% of consumers say they want to switch between channels when interacting with a brand yet only 50% of companies support cross channel interactions.
To add to the difficulty, consumers expect their brands to know their details, across all their channels. They don’t expect to repeat themselves at every interaction, and they expect to be presented with pre-filled information.
A Digital Experience Platform (DXP) empowers brands to reach out to their customers on different devices and channels, providing a seamless multichannel experience.
Brands may also introduce trigger-based email automation that delivers messages to their customers based on where they are in their customer journey. Specifically paying attention to which channels they arrive from and what content they consume.
When brands choose to communicate through new digital channels, they should also make sure their customers are aware.
Digital transformation is a work in progress. These are only a few of the customer experience benefits brands can expect to see from their digital transformation initiatives.
Customer expectations have evolved. And this new normal demands efficient processes from brands. Ultimately, brands and their consumers can only benefit, and they will derive exponential value from digital transformation for years to come.
Creating a digital transformation strategy isn’t optional for enterprises anymore; it’s required. Indeed, with the proliferation of SaaS apps, from collaboration to document management to online marketing tools and more, digital transformation is something you’re probably already undertaking, whether deliberately or not.
And the reasons for that are clear. Digital transformation (DT) creates new possibilities and ways of working for enterprises. It transforms your enterprise into an agile, nimble organisation your customers love to do business with. Companies have seen significant improvements in their product and service offerings, and have seen increased operational efficiencies.
Despite the promises, however, rushing into a digital transformation process without an adequately formulated plan is a recipe for disaster. Often, organisations mistake digital transformation for pure technological transformation and fail to understand the human and process change elements involved.
Clear targets and management buy-in are just some of the elements required in a successful digital transformation project. Embracing new technologies and habits is the way to succeed.
First, we’ll define what a digital transformation strategy is, and then we’ll outline six key pillars that will ensure your digital transformation project’s success.
What is a digital transformation strategy?
There is a common misconception among business leaders that digital transformation starts with technology. The problem with this approach is that it fails to consider the human and economic factors that drive business transformation. So it may be less of a misnomer to call it digital business transformation.
Whatever approach you choose, you need to create appropriate levels of digital technology synergy, brand integration, investment coordination, skill development, vendor management, and innovation over the long term. (George Westerman, MIT Sloan)
In fact, a digital transformation strategy is a detailed plan for how an organisation intends to reposition itself in an increasingly digitised economy. Customers and stakeholders are changing the way they work and shop, and business models need to adapt.
The challenge with digital transformation is it means different things to different people, even within the same organisation. Some people may think of digital as going paperless. Others may think of it as data analytics. Yet others may think it’s about moving to the cloud.
For this very reason, it’s vital to be crystal clear what digital actually means to your organisation. It’s equally essential that all stakeholders be clear of what that means.
An excellent place to start is your company’s 5 and 10-year goals. This forces you to draw a compelling business case for investing in a business transformation plan. It also invites the C-suite into the conversation right from the beginning. They’ll be instrumental in driving the cultural change digital transformation requires.
When considering the huge operational and cost benefits of digital technologies such as Artificial Intelligence (AI) or Internet of Things (IoT), there’s a tendency to jump right in without a proper assessment of the organisation’s strategic requirements. Rolling out new technologies without assessing or tracking their impact across the organisation could turn your project into a costly disaster.
Start by analysing your own needs from a cultural and business perspective. Set your business objectives and document the risks. Run frequent tests with the new technologies, ask for feedback from stakeholders, and monitor their effectiveness.
Start with your company culture
Your digital transformation strategy starts with your company culture. After all, it’s your employees, stakeholders and customers that will ultimately determine whether your digital transformation project is a success or not.
Your company culture is made up of people (shared values), attributes (products and services) and characteristics (geography etc…). These elements determine how well new technology is embraced and utilised. Artificial Intelligence, for example, may be received differently in some types of organisations than others. As mentioned earlier, the C-suite has a critical role to play in driving enthusiasm for digital transformation.
Resistance to change is normal. It’s only natural human behaviour. Beyond the C-Suite, every department needs to be on board. Transparency and communication are key. Employees need to understand why changes are happening within the company and what’s expected of them. This ensures everyone is working towards the same goals.
Set clear goals
To the person who does not know where he wants to go, there is no favourable wind. (Seneca)
Digital transformation is a journey, not an event. It’s essential to identify key milestones and targets to aim for, low hanging fruit so to speak. The first digital transformation project is crucial in proving the concept and building up momentum. Key stakeholders should be kept updated on progress through newsletters and other internal communication channels. This may seem like stating the obvious, but the Harvard Business Review reports that 70% of all digital transformation initiatives did not reach their goals in 2019.
Build internal skills
Companies traditionally hire people around specific industry and functional skills. Often this means there will be gaps in their digital skillsets. They’ll therefore need to acquire these new skill sets as the digital transformation programs roll out.
Agile working, for example, models itself on agile software development. It emphasises speed and autonomy, working in short bursts (sprints) of 2-3 weeks, with frequent reassessment and adaptation.
A digital unit independent of the organisation can champion new working methods, such as agile product development. This can speed up the digital transformation process without jeopardising existing processes.
Find technology partners
Technology and implementation go hand in hand. However revolutionary the technology, if your team lacks the experience in implementing it, it’s just an expensive new way of doing old things. Strengthen your competencies with partners who have experience in your industry and a track record in applying the technology.
Some of the questions you may have are:
- Does the vendor share my vision for digital transformation?
- Can the vendor support this vision?
- Does the technology support operational scaling?
- Will the technology work across the business, not just one department?
- Will the new technology integrate with my existing technology?
Roll out the technology
If you’ve carefully laid out your digital transformation plan, the next step is to put it into practice. You should now have a vision, broad support and a technology roadmap. You should have completed your pilots and should now be confident about rolling out the technology. Technologies you could be rolling out as part of your digital transformation plan include:
- Artificial Intelligence (AI) and Machine Learning
- Augmented Reality (AR)
- Internet of Things (IoT)
You may choose to limit the rollout to one department only, which is fine. But do not treat this as a pilot project. At this stage, you should be fully committed to your project and embrace the new technology.
Monitor and scale
By definition, digital transformation implies openness to change and feedback. You have to be ready to change your approach as customer and stakeholder needs evolve. It’s easy to assume everyone is satisfied with the new technology, so it’s essential to keep monitoring.
Often this reveals changes to be made and further work to be done. For example, you may have rolled out AI technology to support the sales process. You then realise after feedback you could also extend this technology to your support team. Data analytics will help you track and measure your progress, allowing you to adjust your course as your rollout progresses.
As you start seeing results from your digital transformation efforts, build on them to formulate a long term strategy. As your transformation roadmap evolves, new ways will emerge of improving connections between people, products and processes. Use opportunities to scale horizontally by applying the same approach to other business units, or vertically by applying complementary technologies.
A digital transformation strategy is a long term plan that seeks to deliver long term business value by improving the connections between people, products and processes.
Correct planning is critical, or enterprises risk expensive failures. It’s essential to separate the business goals from the technology. Technology simply enables business goals. A transformation project affects more than technology and involves company culture, customers and stakeholders as well.
With a solid digital transformation strategy in place, your enterprise has a far greater chance of success.