In a series of blog posts, I’ll turn my attention to Digital Transformation. This one lays-out the foundational elements of the phenomenon (the history, challenges, and considerations) when embarking on the journey, while others will focus on a particular industry vertical or market segment. Enjoy!
The newest buzzword in the industry seems to be “Digital Transformation.” As with most buzzwords, everyone seems to have their own definition, which is often so vague as to be meaningless. Sometimes the best definitions are the ones that equally describe what it is not, as well as what it is.
Definition: In my view, Digital Transformation fundamentally impacts our lives in more ways than the one for which it was initially created/deployed. Synergies are created, not single-point solutions, nor incremental improvements. Instead, it represents significant/major overhauls. It’s the difference between revolution and evolution in which a snowball-like effect hastens the impact. It’s not about jumping on the bandwagon, but about leading the charge in your own organization and thereby, transforming the industry itself. It’s also not about being first-to-market; it’s about transforming it for everyone, especially your customer.
A SEISMIC SHIFT IN THE BALANCE OF POWER BETWEEN CUSTOMERS AND COMPANIES OCCURRED.
We no longer live in a world in which companies dictate to their customers. The prelude to this shift occurred in stages. When customer complaint letters went unanswered and unheard, sometimes Consumer Protection Agencies would step-in. However, more immediate action could be had when customer complaints were made to print and TV journalists and aired on the evening news or in tomorrow’s paper. Now the formula was fixed.
The key to company action was through public forums. Luckily, social media came along and provided the perfect opportunity to not only air grievances in public, but often in real-time, as well. Companies could no longer hide customer complaints, and customers discovered that they weren’t alone. I could go on, but this is a topic for another blog post. Back to Digital Transformation.
Once companies realized that customers’ expectations were being set ever-higher, settling for less was not an option. In fact, an outstanding customer experience was rapidly becoming the bare minimum in assessing whether or not a customer wanted to do business with a company. As a result, companies had to step-up their game to attract new customers and keep existing ones. Therefore, it is through this customer-facing lens that Digital Transformation emerged.
CHALLENGES
ROI: When companies assess any new purchase, approach, or investment, Return-On-Investment (ROI) is always a point-of-discussion. However, there are a few challenges in applying ROI to Digital Transformation. First, ROI works better when dealing with incremental changes, not transformative initiatives. Second, ROI works best when dealing with more quantifiable terms. However, Digital Transformation is a qualitative concept seeking a quantitative assessment. While it’s not impossible to assign a value to a qualitative item (think, “goodwill” in the world of accounting), it becomes increasingly difficult to “value” a customer (new and existing). Third, ROI is oftentimes about “quick wins.” However, Digital Transformation has a much longer time horizon…by design. In fact, that’s the whole point. Digital Transformation is meant to be disruptive. Therefore, values would need to be assigned to moving targets that become even more distant as we move through time. For example, what is the value of…
– Customer loyalty
– Maintaining current customers
– Attaining new customers
– Word-of-mouth advertising
– Company/brand awareness and reputation
Organizational Changes: It’s important to instill in all employees that a customer-centric focus is everyone’s job. Every metric that’s tracked should tie-back to a customer-based goal. Furthermore, Digital Transformation synergies often entail a cross-functional approach and coordination in order to reap the greatest potential benefits. As a result, companies still following a matrix organizational structure will find this approach more challenging. However, since matrix organizations are often seen as less-agile anyway, this challenge should come as no surprise.
FINAL POINT
Regulations always accompany transformative changes and disruptive technologies. I say this to you not to discourage your Digital Transformation efforts but instead, to prepare you for the journey as you would a long-distance roadtrip. In addition to GPS, you’ll need up-to-date information on the weather and road conditions in order to avoid the hazards and make great time! Good luck!
