Companies are facing unprecedented change in today’s digital era. Innovation is a must to stay ahead of emerging, more agile competitors. Leveraging technology and data to drive customer value is at the top of every strategy list. Fundamental shifts in the workforce are forcing organizations to undergo radical restructuring regarding behavior and operations. To tackle these organizational changes there is only one solution: Digital Transformation.
Defining Digital Transformation
Digital transformation is impacting how companies across every industry do business. With many large-scale, company-wide, impactful change initiatives, such as innovation, Agile, going to the cloud, or lean, it can be difficult to define digital transformation and what it means to each company. To compound the challenge, digital transformation often gets confused with both digitization (the process of converting information into a digital format) and digitalization (the process of using digital technologies to change a business model and provide new revenue and value-producing opportunities, per Gartner).
Digital transformation is commonly defined as the cross-organizational, strategic business change that centers around improving the customer experience, often enabled by digital technologies. While these digital transformation programs often include digitization and digitalization projects, the result of these changes centers around customer benefits.
The focus of digital transformation isn’t simply about technology and executing IT projects. It’s about leveraging technology throughout the enterprise and placing customer experience at the center of all decision making.
Before embarking on a digital transformation initiative, or any company change of this magnitude, leadership should clearly articulate and communicate what this investment means to the company and ultimately the customer. Create a digital transformation definition for your company. The effort dedicated in advance to characterizing this new way of operating will circumvent any misunderstanding, clearly articulating that digitizing information and digitalizing processes are only a small piece of the larger vision.
Creating a Digital Transformation Strategy
To maximize the return on investment in digital transformation, organizations must develop a cross-functional strategy that incorporates every department that has a touch point on the customer’s journey: from customer service to product development, supply chain to marketing. While IT may champion your initiative, the strategy should embrace enterprise digital transformation. Without the proper strategy in place, the money and time dedicated will be wasted, the value to the customer will be watered down, and another corporate buzzword will go by the wayside.
Creating a digital transformation strategy requires a significant mind-shift among executives and employees alike. It focuses on:
- A single source of truth over information silos
- Improving the overall business over individual process changes
- Integrated data over ad hoc and manual
- A digital transformation solution over a single point solution (that may not even address customer needs)
- Customers successfully achieving their goals over achievement of managerial objectives
Tactically, the digital transformation strategy needs to be span the entire company and must be visual, bringing together the corporate strategy, product strategy, technology strategy, and digital strategy into a single view: a strategic, digital transformation roadmap. Gone are the days of strategies living in presentation slides. Because of the breadth and depth of this initiative, the strategy must be connected to execution. It must cascade from missions and objectives down into the programs, projects, products, technologies, and business capabilities required to deliver the strategy. The dependencies between these outcomes must be clear and well-understood. If one component is delayed, what is the downstream effect? How will that impact resource availability and other projects? Will the delay have a financial consequence?
Digital transformation can look different for every organization. There is no “one right way” to accomplish the benefits that implementing a digital transformation strategy promises. Will your strategy incorporate artificial intelligence (AI), mobility, machine learning, analytics for improved decision making, supply chain improvements, the voice of the customer programs, or design thinking?
It isn’t about the launch of any one breakthrough product, the use of a cool new emerging technology, the introduction of a new methodology, or the implementation of a single software solution, though these may all be a part of the larger strategy. The best path for each company is dependent on multiple factors including leadership’s commitment to change and invest, what the competition is doing, the level of risk the company is willing to take on, the core capabilities already in place or required for delivery, and not losing sight of the outcomes are trying to achieve with the digital transformation.
The end goal of implementing a digital transformation strategy should focus on business transformation, even if it is accomplished incrementally. It’s about making progress to enhance the customer experience to be higher quality, more intuitive, and with improved consistency. Establishing key performance indicators (KPIs) and milestones along the way will help move the initiative forward and ensure the program doesn’t stall after the first phase, as a digital transformation is never really “done.”
Building Digital Transformation Capabilities
In conjunction with building a digital transformation strategy, companies should also take stock in their core business capabilities – the specific and distinct strengths or foundational “know-how” embedded in the company that keep it competitive and moving forward. For example, some organizations have innovation and employee retention as capabilities. Other companies have organizational agility, leadership, a strong growth portfolio, and tools and processes amongst their core competencies.
When evaluating business capabilities in the context of embarking on a digital transformation initiative, companies should evaluate what new or existing capabilities and enablers of capabilities are needed to fulfill the strategic goals. Big Data? Mobile? IoT (Internet of Things)? And in support of these capabilities, companies should also consider assessing the required skills and resource capacity associated needed to identify, implement, measure, and improve these business capabilities.
Business leaders are starting to recognize the importance of purposefully planning business capabilities to understand gaps, overlaps, and areas that require development or renovation. The ability to deliver against the digital transformation strategy depends heavily on these building blocks. Companies who skip this part of the evaluation do so at their own peril.
For organizations new to capabilities management, consider creating a business capability map. In the portfolio, evaluate them against business goals, including their overall maturity, and any planned investments to advance the capabilities to create a capability roadmap that drives the overall corporate strategy. This approach will guide executive leadership in making investment decisions that lead to desired business outcomes. It will also streamline and speed the overall portfolio prioritization process as the organization pivots to respond to an ever-changing marketplace and new competitors who threaten to encroach on market share.
Successfully Overcoming the Challenges of Digital Transformation
With so many considerations and dependencies, the sheer size and scope of a digital transformation can be daunting. Add to that complexity a “we’ve always done it this way” culture along with a potentially inadequate or outdated technology portfolio, the odds of success decrease dramatically.
Each industry and organization will have a different approach to digital transformation – healthcare will be different from retail, and banking will take a different approach than consumer packaged goods (CPG). But there are a few best practices – a digital transformation framework, to ensure the achievement of your digital transformation strategy.
Map the customer journey to gain insights
Organizations can find great success in taking a design thinking approach that focuses on the customer and solutions that aim to delight. This vision and clear definition of the ideal customer experience allows companies to explore the possibilities of what “could be.” This may include surveys, focus groups, customer feedback, and observation. The key is to put design first and supporting technology second.
Each step (and sub-step) of the journey, from awareness to loyalty, must be evaluated in detail. If specific trouble spots are known, either through customer feedback or employee knowledge, start there for quick wins and then expand end to end.
As a best practice, this customer journey map should be living, non-static, and connected, with the ability to see all supporting processes, technologies, teams, and business capabilities. To be effective, it has to allow for both current state and future state visualizations that outline the projects and programs that are required to drive the change, contributing to the larger digital transformation.
Communicate the roadmap to cast vision
Like the customer journey maps, roadmaps must be dynamic components of the digital transformation strategy. The strategic and digital transformation roadmaps should both be comprised of the other roadmaps – the product roadmap, the technology roadmap, and the capabilities roadmap – to communicate the overarching plan and timing to every member of the organization and your customer base, where it makes sense. To deliver on the benefits of digital, move your roadmaps to digital.
Create a continuous improvement culture to embrace change
Customer needs, technology landscapes, and the marketplace are all in a constant state of evolution. Furthermore, with new competitors on the rise, companies must embrace a state of continuous improvement and transition from serial processes to a continuous process. Voice-of-the-customer programs, strategic planning, portfolio analysis, technology roadmapping, and capacity planning should move from an annual exercise toward a continuous process.
Companies should aim to create an environment of continuous improvement and innovation to deliver customer value faster. By visualizing work as it flows through each process connected to the customer journey, leadership gains an overall understanding of bottlenecks, gaps, and opportunities for efficiency and productivity improvements.
Accelerate collaboration to break down silos
The internal transformation required to improve the customer experience coalesces with other fundamental industry shifts, like an increasingly remote workforce, changing methodologies, a greater thirst for innovation to stay relevant, and the need for speed and agility. Together these market forces point toward a demand for better collaboration across the organization. Companies can leverage digital to unify and communicate internally as well as engage externally with customers, breaking down any regional, divisional, or departmental barriers.
Teams are eager to solve the problems highlighted as part of the digital transformation journey, but need mobile, intuitive collaboration tools to get work done and easily provide visibility to progress or escalate places where they are blocked from moving forward. Long, manual status reports emailed and then consolidated are not part of a digital transformation strategy. Going digital to not only manage the digital transformation initiative but also to best serve customers is essential. Providing digital collaboration workspaces that are flexible enough to support every team, regardless of methodology (scrum, agile, Kanban, gated, waterfall), in completing their work on time will provide the visibility and efficiency required to stay ahead of the curve in the digital era.
Deliver analytics to drive decision making
Perhaps the most important best practice to guarantee digital transformation success is starting with the end in mind. What outcomes does the company want to achieve from their digital transformation investment? How will the company measure and report on progress? What metrics will drive the desired benefits?
Some traditional KPIs used to measure customer satisfaction include revenue growth, margin expansion, Net Promoter Score (NPS), Customer Effort Score (CES), improved customer wait-times, improved brand loyalty, and e-commerce metrics such as web search response time and mobile app ratings. But don’t forget about internal metrics to calculate improvements in productivity, time to market, throughput, and cycle times, many of which come through automation (digitization) of manual processes. These improvements free up time for more customer engagement, innovation, and solution exploration.
Realizing the Potential of Digital Transformation
To be a digital transformation leader and successfully execute the digital transformation strategy, companies must rewire internally to better serve their customers and enhance the customer experience in every way possible. This change is not an IT initiative – it’s an organizational initiative. Investment now has the power to create new markets, increase revenue, open new sales channels, improve organizational efficiency and agility, and generate devoted customers who keep coming back.
To fully embrace digital transformation, enterprises must define digital transformation, build an achievable strategy, adopt a digital culture, leverage purpose-built technology to address necessary improvements for the customer experience, and deliver data that drive improved decision making. To compete digitally, you’ve got to transform digitally and reap the benefits of a digital transformation organization.