Over the past 20 years, digital technologies have altered lives and the corporate landscape in ways largely unimagined during the early days of the Internet revolution; since 2000, more than half of the companies in the Fortune 500 have been disrupted out of existence. Equally massive are the changes that digital has enabled in how businesses interact with current and prospective customers, their internal operations, and how they organize themselves to deliver customer value.
Companies born digital have enjoyed an operational velocity that older firms saddled with legacy technology systems and organizational structures struggle to achieve. However, as the slow and public death of digital-first firms like Yahoo! amply demonstrates, even companies that boast significant expertise with digital technologies can succumb to the competitive pressures digital technologies generate.
In our internal debates at Huge about how to best help clients who are struggling with digital adoption, we have recognized that successful digital transformations depend only in part on technology adoption and data maturity. Inspiring employees to adopt new habits, re-organizing teams to better deliver value that customers need, and nurturing a culture of ceaseless learning and experimentation stand as equally critical considerations.
Firms that successfully transform achieve digital fluency and confidently select and adopt new digital technologies. Their operations empower employees to engage in daily dialogue with each other via digital tools, and their culture permits testing of hypotheses through continuous experimentation. Perhaps most important, customer-centric design practices drive their strategic decision-making. If you’re about to embark on a digital transformation, you’ll need to consider all these dimensions and seek to master them.
Fluency with digital technologies enables firms to digitize cumbersome manual processes, shifting effort to higher-value activities. Digital technologies make employees more efficient through the improved knowledge sharing that minimizes wheel reinventions. Digital-savvy firms boast the ability to create digital products and services in house, to the benefit of external customers and the improved productivity of employees. Digital firms also establish a comprehensive understanding of customer behavior from their consolidation of user-related data.
Embracing a customer-centric perspective fundamentally transforms strategic planning. For customer-centric firms, setting strategy begins with the questions, “What are our customers struggling with? What do they need and want?” and the all-important, “Would someone actually want to pay for this new product?” By focusing on their customers, firms minimize the significant waste associated with developing products and features that no one ever wanted in the first place.
In making the shift to a customer-centric culture, firms also rethink their organizational structure. Historically, operational verticals enabled a firm to optimize the discrete steps in a production process, leading to improved quality control and allowing for the rapid scaling of mass-produced products. However, in today’s experience economy, customers expect seamless, personalized interactions across all of a company’s touchpoints and poor handoffs between functional silos fracture that experience. Firms like GE, IBM, and Thomson Reuters have created units empowered to unify the customer experience across digital, physical, call center, retail, and mail touchpoints, breaking down organizational silos in the process.
A core strength of a digital firm is a test-and-learn culture that permeates all levels and functions of the organization. Ongoing experimentation becomes the norm. These dynamic firms further break down operational silos aided by the deployment of enterprise collaboration platforms that enable exchanges of expertise and insights across functions with social media-style interactions (following, groups).
In their book, Leading Digital: Turning Technology into Business Transformation, authors George Westerman, Didier Bonnet, and Andrew McAfee present their findings from a multi-year study of hundreds of large global enterprises. The research didn’t focus on digital-first startups, but legacy firms that had to transform to compete. They found that companies that develop “digital capabilities to work differently and the leadership capabilities required to set a vision and execute on it…[are] 26% more profitable than their average industry competitors and generate 9% more revenue with their existing physical capacity.”
The Way Forward.
The imperatives for your business go beyond making the A-to-B transition from non-digital to digital; the challenges and pressures of the experience economy demand that you simultaneously and continuously evolve your technology, operations, and organizational structure to become not only digital but also dynamic and customer-centric.
The good news is that many large, multinational companies are successfully making the transition to being digital. In the course of partnering with some of these organizations, we’ve established a toolkit of imperatives that have proven effective in accelerating change and transforming technology, operations, and organizational structures.
We’re presenting these strategies as a flexible toolkit because your journey will be unique. The urgency of the challenges you face, your strengths, and where you find yourself on the journey to becoming digital will all determine the tools you select. We’ve organized the strategies into three major area. In the first area, Define, you’ll set your customer-centric vision and chart the roadmap to achieve it. In the second area, Prove, you’ll establish digital proof points that demonstrate the value of your transformation efforts and your operational ability to create excellent experiences. In the last area, Scale, you’ll build on the foundation you’ve set to transform your firm into a fully digital organization. At the center of the toolkit sit Data and Technology, the two great enablers of digital success; but, importantly, you will never derive maximum value from your technology and data assets if you do not deploy them in ways that drive value for your customers.
Set your vision.
Why: Transforming a large enterprise into a digital, dynamic, and customer-centric firm requires broad alignment across the organization. Inspiring your employees with a compelling vision of your company’s future helps keep everyone motivated to run in the right direction.
What: A vision communicates the desired future state of how your customers experience your business. Expressing your vision as a succinct statement is a good starting point (“By 2019, 80% of our sales will take place via our digital channels”). However, a visualization of the future-state customer experience will more clearly and viscerally communicate what you’re aiming to achieve. A comprehensive vision could also depict the future-state employee experience, organizational structure, and business model.
How: Start by assessing the current state of your business (customer experience, operational and technological capabilities, competitors) with an eye toward identifying your unique strengths and the unmet needs of your users, and iteratively move from a verbal to a visual expression of your future. Include stakeholders from all business units and tap their expertise to determine a vision that is achievable. By inviting colleagues to co-create the vision, you motivate them to achieve it.
Chart your roadmap.
Why: A roadmap with clear timelines and milestones will be a critical reference for your leadership team and will help everyone stay focused on local responsibilities while also maintaining a global perspective. In addition to calendar milestones, your roadmap should be associated with performance metrics so you can measure both speed and quality.
What: Once you’ve created your vision, the next critical step is defining how you will achieve it. Given that you’ll be transforming along several dimensions simultaneously, your roadmap will likely have several “swimlanes” that represent concurrent and complementary initiatives.
How: As with the creation of your vision, the roadmapping should involve the same cross-section of leaders from all business units. Each business unit likely already has its own roadmap. Reconciling all of them during a group exercise will help everyone understand dependencies and find efficiencies, enabling you to agree collectively on the smartest tradeoffs.
Why: Beacons are useful reference points that provide clear definitions of what your digital organization should be delivering to market.
What: A beacon is a real example that sets the quality bar for a digital experience or operational excellence. Your beacon might be a website or mobile app created in adherence with best practices in customer-centric design, resulting in a best-in-class result. In generating a best-in-class experience, you can also tell the story of what the team did differently. That story could become an operational beacon, illuminating for others how to work differently to achieve better results.
How: Choose to design an experience that’s important for your business, but also one that employees would consider typical rather than an outlier. If you also have the goal of establishing an operational beacon, select an experience owned by a business unit with higher digital maturity.
Why: In large enterprises especially, employees may have become jaded with corporate-sponsored enterprise initiatives. They may lack confidence that leadership has the focus and stamina to lead the effort to become digital. Instead of actively contributing, many employees might decide just to hide from obligations, assuming it’s only a matter of time until this too falls by the wayside.
What: Continuously signal to your employees that your efforts to become a digital, dynamic, and customer-centric firm are critical to your long-term success.
How: There are many ways you can engage your employees in your transformation initiative. Communicating well and often is the most basic requirement: make sure everyone is aware of critical decisions and when their effects might be felt in everyone’s daily work. Beyond sharing information, invite employees to contribute ideas; you could start an online dialogue around transformation topics on your enterprise collaboration platform, or run hack-a-thons focused on generating solutions for stubborn problems that inhibit progress.
Enable enterprise collaboration.
Why: When companies have the aim of creating valuable experiences for customers, they quickly realize the importance of connecting the various parts of their business to share insights about these customers. These insights can and often do lead to innovations.
What: Stand up an enterprise-wide collaboration platform that connects your employees and allows them to share insights and information across business units and geographies. The platform should be accessible from all the devices employees use throughout the day.
How: If your company currently maintains several collaboration platforms owned by different business units or global offices, you’ll need to determine which platforms can be retired or consolidated. Without this sunsetting and consolidation, you won’t achieve the desired network effects, i.e. no single collaboration platform will be used by a critical mass of employees. Retiring and consolidating platforms will not necessarily be a simple task: some platforms might be functioning well within a business unit and they’ll be loath to tamper with it; in other cases, a homegrown collaboration platform might be a point of pride for your IT team and their “not made here” ethos will bias them against any new out-of-box solutions.
The platform you put in place could be something you build in-house or a commercially available solution that you buy; there are plentiful examples of it working either way. Before deciding which way to go, you should conduct a cost-benefit analysis that takes your culture into account as well, e.g. the “not made here” disposition we just mentioned.
Organize for Digital Excellence.
Why: Most pre-Internet companies struggle to deliver a seamless, personalized user experience because different units own different steps in the customer journey, resulting in inconsistencies and bumpiness. Well-designed, integrated customer experiences have become a critical competitive advantage for firms that, like Apple, master the craft of delivering a unified experience across stores, digital platforms, and devices.
What: Your experience team maintains the quality of your customer experience across all touchpoints (digital, retail, call center, mail).
How: Strongly consider making your new experience team a separate functional unit consisting of a mix of new hires (who will not be held back by “the way we do things”) and forward-thinking current employees who can serve as friendly-faced ambassadors back to the legacy business. There may be resistance to your experience team; focusing them on the creation of early proof points may help quell the grumbling.
Data and Technology: The Fuel for Digital Transformation.
Without a well-defined data strategy, an organization may collect and store incredible volumes of data, but realize very little value from it, because it isn’t structured or delivered in time for key decisions. Without a healthy data culture, transparency and accountability suffer, resulting in repeated mistakes, resolvable inefficiencies, and propagandizing instead of real progress. Both data strategy and data culture are necessary for digital transformation to drive results, and for those results to be correctly recognized, communicated, and replicated at scale across your organization.
Simply put, a data strategy is a map of valuable information assets within your company, and how each may be put to use. Data culture is the manner in which your organization supports informed decision making, especially the sharing of successes and failures, to reduce risk and produce results. Both are necessary for business transformation to emerge from a successful but isolated beacon to a scaled and thriving enterprise.
First, identify what datasets are actively driving the decisions of teams, and understand the economic and cultural drivers of that value. Next, reduce or eliminate investment in datasets for which the effort of collection and storage isn’t returned in usage and results. Finally, recognize and incentivize effective application of data by teams, not just storage, scale, and security. You’ll know it’s working when you see more “decisions per data point” across your organization.
Technology enables and fuels digital transformations. And yet, technology is disposable. New technologies rapidly come to market and existing technologies become obsolete. Without adapting engineering culture throughout the organization and tightly aligning technology decisions to the digital products and services vision, organizations will continue to struggle with slow and ineffective product release cycles and fall behind more agile competition.
Effective digital transformation requires adapting of strong engineering culture and shifting from technology-driven to customer-need-driven technology decisions. An engineering culture assumes ongoing exploration of the latest advancements in technology, experimentation with various ways to apply new technology to solve problems, and having a stable process to regularly and quickly deploy winning ideas. Customer-need-driven technology decisions lead to a more maintainable and future-proofed technical foundation. As customer needs evolve, organizations with strong engineering cultures are able to rapidly test and deploy new digital products and services to continuously deliver high customer value.
To set the right technical foundation, as part of the current-state assessment that’s the initial step in setting a vision, you should map out all your current technology systems as well as perform market landscape analysis to identify newer or missing technologies. Establish core principles for selecting the right technology, but delay making the final decision until as close to the implementation as possible. First focus on the technologies required to successfully implement beacon projects during the Prove phase. Continue making technology decisions as digital transformation is scaled across the organization to align decision to the strategy. Becoming a digital company requires a shift in the C-suite mindset. Your CIO and CTO must be ready to adapt new technology fast. Your CFO has to expect that technology infrastructures will change, and plan for it instead of trying to control it. Your CEO should be on the lookout for ways to adapt new technologies to improve products and services and offer greater value to your customers.
—Huge's Gela Fridman, managing director, technology, and Michael Horn, managing director, data science & analytics, contributed to this report.