Digitally Transforming What Exactly?

If I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute resolving it. 
Albert Einstein

I’ve been asked multiple times recently what “digital transformation” means? Given that by 2023 conservative estimates of annual expenditure on digital transformations are north of $2 trillion but with well over 50% of spend considered wasted to date, it seems like a fundamentally important concept to understand. Given rapidly changing customer expectations, failure at the starting block here will pose existential threats to companies.

One of my favourite questions to ask for the last few years is, “What problem are we trying to solve?” Often, we race into solutioning a poorly defined problem. It’s not uncommon to launch into a transformation effort without fully understanding, or agreeing on, what success looks like. What might start off as an attempt to increase an organisation’s ability to more agilely respond to customer needs can easily become a misguided attempt to prescriptively implement Scrum or similar as “the” solution. The process becomes the raison d’etre rather than the outcome, and minds close to whether measured progress is the right progress.

So down to brass tacks: digital transformation is primarily about continually evolving an organisation’s culture and engagement with customers supported by technology as appropriate. I won’t repeat the many published pieces that warn companies not to make such transformations primarily about the technology. Transformation is about creating organisational agility in the face of changing customer needs and competitive landscapes. It is also about creating options that allow you to more frictionlessly pivot based on learnings, mitigating the need to be an organisational clairvoyant. Digital transformations typically have two connotations: spend and internal operating efficiencies, and customer engagement. I will focus on the latter.

A clear and hearts-and-mind vision is critical to mobilise, direct, and energise an organisation. Many organisations unfortunately develop fancy visions that are directionally barren, such as:

• “We will become a leader in Artificial Intelligence/Internet of Things/<insert other cool new technology>.”
• “We will leverage our organisational synergies to deliver world-class experiences that holistically engage our customers through digital applications.”

I suggest you define transformation for your business by combining three elements: the current and future state customer journey, data, and simple English. Let me break these apart.

The customer journey is normally a narrative and/or diagram of how your customers and business interact step by step. “Customers” broadly means employees, suppliers, or actual paying customers depending on your business. One CMO I worked with had the journey on sheets of paper that stretched around her office, with opportunities to remove friction identified. Analysing the journey is not purely about optimisation. It is also about identifying new avenues that customers desire and identifying moments where the customer can be delighted, as well as how to recover from subpar customer experiences. In the case of McDonald’s, these new avenues included home delivery, mobile ordering, curb-side pick-up, and table service. The journey should be at a manageable level of detail without calling out every paralysing exception, but also without trying to over standardise or over generalise the experiences. The working backwards process at Amazon is used here.

Different types of customers typically act in different ways, creating multiple journeys. Address this by creating personas for different customer groups using techniques such as psychographic segmentation. These form good approximations for behaviour, but don’t start assuming these “typical” customers are really completely representative of your customer demographic. The personas might also act differently depending on country and culture, such as in Japan where there is higher implicit trust in front-line employees than typically found in the USA. Over time you can iterate these personas, getting into more detail in order to drive a greater degree of personalisation, a key tenet of many companies’ transformation.

Not all of the opportunities can be identified by looking at the existing journeys or extracted by white-boarding. Data must be used to provide or validate insights. Sources can include qualitative data like observations, industry insights and trends, competitor visits, and customer and front-line employee interviews, and quantitative data such as drive-thru speed of service metrics or drop-out rates in your mobile application funnel. There is little substitute for personally experiencing or observing journeys “in the wild”. This is likely create observations that lead to hypotheses on why customers act the way they do in certain situations, ideal fodder for future experiments. Curiosity should be your key competence here.

The third element is simple language. We love our corporate Dilbert-speak, but a transformational vision written in plain, emotionally engaging language is more effective. A colleague ran this process for my technology development leadership team once. We left not with vision and mission statements, but with captured aspirations and our “pride statement”, viscerally highlighting what strengths the team wanted to build on. This co-ownership of vocabulary is powerful. Support the vision with a small number of pertinent KPIs, but be cautious that these KPIs don’t become the strategy. If used without context, simple KPIs such as customer satisfaction can lead to unintended and business degrading consequences.

Where Next?

The journey mapping and analytical activities are a starting point. The process might be owned by the Chief Digital or Marketing Officer but needs to be understood and bought into by all the CXOs. Unfortunately, there are too many stories of great visions that some CXOs paid lip service to but did not commit resources and energy to. As described in my post on change, genuine, continually validated alignment is critical and should not be underestimated.

Socialise the future state and rationale with as many employees as possible. Nothing replaces the resonance of telling stories here. Tell and tell again stories on the current state to highlight both the good aspects to protect and the experiences that need to change, and stories of the future state. Some tips can be found here.

Use the customer journeys and proposed interventions to identify supporting cultural and organisational changes. Some we have discussed in these blogs, such as the approach to design-thinking and agile, others changes could be to better, genuine empowerment of front-line staff. If empowerment is needed, and you don’t feel comfortable in driving this change, don’t expect technology to be the solution.

NOW we can start talking about the tools required to support the new journeys. I believe most organisations looking to create more engaging customer experiences need to modernise their technology, engage their business leadership in technology, and evolve their product development methodologies. Customer journey evolution by nature is iterative: you learn about what does and does not work by experimenting with the customer. The one guarantee is that some of these experiments will fail and you will want to minimise cost, some will be so successful you will want to scale them quickly, and others will trigger a Newton’s Law type reaction, creating unintended consequence that you will need to react to.

Finally, show a bias for action. Get some small wins under your belt to show organisational commitment to the ever-evolving journey and to start the process of cultural change.

Go walk in your customers’ shoes. Really understand their needs and then apply technology as needed. You will have a better company because of it.

Phil

How does Amazon Stay at Day One? Forbes

Not So Fast: What Problem Are We Trying To Solve, Forbes

Digital Transformation is not about Technology, Harvard Business Review

The Magic that Makes Customer Experiences Stick, MIT Sloan Management Review

Don’t Let Metrics Undermine Your Business, Harvard Business Review