There are many definitions for digital transformation but it all boils down to applying digital technologies to advance business’ agendas and deliver against changing customer expectations.
In today’s day and age, it is hard to imagine a company that does not rely on some technology when conducting business. This means that most companies would have had to embark on the journey of digital transformation if only to “dip their toes” in it. Some businesses, most recently, found themselves pushed towards digital transformation due to the seismic shifts in customer behaviour caused by the pandemic.
In fact, the need for digital transformation was greatly accelerated by last year’s world events but this trend is likely to stay with us in the foreseeable future. According to Gartner, “Many changes accelerated by COVID-19 will continue to accelerate because they make business sense. For example, customers and citizens shifted their activity online during the lockdown, but that shift will increase, not reverse, in 2021. Seventy-six percent of survey respondents to the 2021 Gartner CIO Survey say that demand for new digital products and services increased in 2020 and 83% say that it will increase in 2021.”1
Adapting to the new reality left some businesses struggling, whilst others thrived. However, even in the more ordinary times, there is clear evidence that digitally mature companies outperform their competitors. This is the case in all industries and has been for a while, with MIT Sloan School of Management suggesting that digitally mature firms are 26% more profitable than their peers.2
But before you embark on a journey for improving your digital capabilities, firstly, you should think about your strategic goals and how digital initiatives could accelerate achieving these. There can be multiple reasons for why you’d like to transform – the threat of being disrupted, efficiency gains, better resource allocation, new business model opportunities, or improvements in CX.
In the pandemic, we saw that shifting customer needs were the true drivers for new digital initiatives. But, of course, this is not entirely new. There are many examples of digital pioneers who mastered the “digital-first” approach and benefited greatly from their ability to continuously adapt at scale and speed that are also very much customer-driven. Amazon, Monzo, Spotify, Apple, Netflix to name just a few. In our experience, one of the most prominent reasons for organisations to undergo digital transformation was to reinvigorate their customer experience and this seems to have been advanced by recent events. For instance, HBR noted that “40 percent of respondents named creating an exceptional and highly relevant customer experience as their number one priority—nearly twice the percentage of those who named it the next-highest ranked priority.”3
Adobe research also agrees, suggesting that success and value will easily be realised by prioritising CX and digital and those who do will reap the benefits. “The importance of improving Customer Experience (CX), and of making digital transformation a priority, has been talked about for years. And now the proof is in the numbers. CX leaders are almost three times more likely than their peers—and digital-first companies are 64% more likely than their peers—to have exceeded their top 2018 business goal.”4
Moreover, from the practical perspective, funds for transformations driven by improvements in customer experience are easier to obtain as they most clearly link to higher revenue generation.5
The various aspects of digital transformation and maturity can seem overwhelming at first but are simpler when broken down into their component parts. Once you’ve established a clear driver to implement new digital enablers, there are 5 key dimensions to consider:
From the outset, establish a clear and compelling vision. The strategy to actualise it will follow by addressing the other dimensions of digital transformation. The digital vision should be driven from the top-down with transparent buy-in from your organisation’s leaders and influencers. However, this is not to say that all staff cannot drive the digital vision with effective leadership, in fact, the opposite – your people will be needed to adopt the desired standards and values to make the future vision a reality. For example, incorporating values, such as ‘adaptive to change’ will be a catalyst for a more agile workforce that can quickly respond to the needs of the future digital vision.
We previously mentioned how the shifting needs of customers was one of the key drivers for digital change during the pandemic. There is little debate that an effective digital transformation strategy must consider the customer experience – and we recommend focusing on this early on. Creating future-proof and streamlined customer journeys and processes will enable you to design an exceptional experience and service both externally (for your customers and users) and internally (for your staff). This can be achieved by identifying existing pain points in customer journeys and inefficiencies in processes and thereafter exploring and prioritising future opportunities. Optimising internal processes and ways of working (for example, to reduce manual effort) in line with looking at customer journeys is of utmost value because it will also empower your staff to deliver great experiences for your customers.
Although the use of technology in digital transformation can often be overstated. We need to understand how we can leverage cutting edge and disruptive technologies, to create an effective IT Strategy. Exploring how technology is going to contribute towards your vision and adapting it to the needs of your business and your customers will ensure that you are truly able to generate value from investments in new technology. A starting point here is to overlay your current technological landscape, understanding where you have a lack of architectural integration and gaps in technology needed to deliver on your digital vision. It is important not to over or underestimate the role technology plays in realising your digital vision – but the answer is always ‘it depends’. As we have stressed, linking technology back to ‘why you want to transform’, as well as your strategic goals and priorities will be the most crucial factor in determining its influence.
Without clear KPIs, reporting mechanisms and quality data, it will be difficult to track the effectiveness of any digital transformation programme. KPIs linked back to your vision will ensure that you are able to measure progress of the transformation – for example, a customer-first digital transformation vision may include Net Promoter Scores and Customer Lifetime Value as critical KPIs.
Digital transformation is just as much about your people, as it is about technology – if not more. They are your greatest asset. Empowering your people to support in delivering your vision, filling gaps in capabilities through diverse recruitment and L&D opportunities and driving an effective top-down approach by your organisation’s leaders are the cornerstones of a successful digital transformation programme.
Assessing where you are in terms of maturity for each of these dimensions, will quickly help you establish what you need to do to move up on the maturity levels.
The holy grail is to achieve the fully digital stage across all dimensions, however, it does not mean you need to tackle all of these areas at the same time. Digital transformations are hard, with Forrester claiming that “more than 50% of digital transformation efforts fizzled completely in 2018” (Forrester as quoted by Forbes). Prioritising against your strategic goal and organisational constraints will allow you to start small whilst adding value fast.
We’ve found that a customer focus on this can be particularly valuable due to the numerous benefits associated with engaging your customers, however, this is just one piece of the puzzle and your digital journey will ultimately depend on your strategic goals and why you want to transform.
If your goal is indeed to offer a better customer experience starting with customer journeys and process optimisation should be a logical first starting point. Creating a digital-first vision with a focus on the customer, and initiating the transformation by concentrating on their journey and experiences, enables you to progress with a transformation that is truly customer-centric. And the more you progress with digital maturity, the more advanced you will become at proactively predicting and adapting to the ever-changing customer landscape.
As we described previously, a way to practically apply this is to understand existing customer pain points and explore future opportunities to improve the customer experience. Adopting this approach will ensure that you’re able to prioritise customer needs as you progress with your digital transformation – for example, you can adapt your IT strategy and allocate the appropriate focus to technological capabilities in order to meet the future desired customer experience. Conversely, if your digital vision is to improve internal resource allocation and enhance employee engagement, then it would make sense to start with a focus on your people and use that as the driving force for your digital vision.
Customer experience is clearly a hot topic and we have discussed at length the numerous benefits to focusing on this from the outset and incorporating it into your digital vision. In the next part of this series, we discuss in more detail how good customer experience drives digital transformation.
