20 January 2021
What if the key for businesses and brands looking to improve performance in an increasingly digital world isn’t digital transformation?
At a time when so much of the interaction between businesses and their customers is moving towards digital channels and tools, many organizations are feeling the pressure to engage in “digital first” strategies to drive performance, optimize operations and protect revenues. These efforts — often characterized as a digital transformation or digital journey — are intensely focused on the addition of eCommerce capabilities, digital portals, and adding more sophisticated and innovative digital tools to help employees engage their customers.
Such ambitious initiatives are often both time intensive and expensive; after all, brand reputation, customer loyalty, and top line performance can hinge on a business’s ability to maintain a seamless digital experience for customers and employees.
But what if digital transformation isn’t about implementing technologies?
The reality is most digital transformations fail — by a wide margin. Why is that? Largely because “digital” does not understand customer needs or deliver customer engagement and intimacy, digital tools cannot change operations or shift performance, and the latest technologies cannot change leadership strategy and employee mindsets.
An effective digital transformation starts with the most basic proposition: a business strategy that centers on all its stakeholder needs and expectations from customers, partners, suppliers, and distributors to their own employees and seeks to improve their experience and relationship with the business. Transformation objectives are then defined and prioritized on the ways in which digital capabilities can be added to engage customers and all stakeholders more intimately, improve processes – often requiring rethinking their operating model – and enable employees to do their work more efficiently. This is all in service of improving organizational performance, expanding revenue streams and raising the bottom line.
Doing this effectively and sustainably requires prioritizing: Before thinking about digital, you must examine your business strategy to make sure it’s solid and aligned to your customers’ expectations and what your employees and operations require to meet those expectations. In turn, that will set you up for a meaningful transformation.
The best way to frame and address that objective is to think about three critical questions:
Q. Why should I consider transforming?
In today’s digital marketplace, whether it be B2B or B2C, people are constantly dazzled by digital experiences. Because of this, expectations of all of us — customers, suppliers, distributors, marketers, even employees — have grown enormously. If a business’ digital capabilities are not up to speed, we know there are industry peers with better technology waiting to welcome us.
Reduced costs are also a factor to consider. Digital paradigms and digital technologies have disrupted cost bases, resulting in more efficient operations and cheaper product delivery and services than in the past. Is your business in a position to take advantage of these efficiencies?
In this light, businesses can get a better understanding of what and how to transform by removing themselves from the echo chamber of competition. Don’t focus on the new technologies your competitors are using. Instead, talk to your customers, partners and employees. Find out what they think the issues are and what they want. For the employees who are on the frontlines (like call reps or other customer service agents), ask what they need to help them do their jobs better. Put that at the forefront of the transformation.
Q. When do I need to consider transforming?
The sense that transformation is needed depends on the state of your business. For businesses that are currently healthy, a constant evaluation of emerging competitive challenges in the digital economy is paramount. If business is distressed or stressed, you’re probably looking to cut costs. In that case, transforming would have to look at the best way to redeploy costs toward growth initiatives. Ask, where is the company healthy and where is it challenged? What’s working and what isn’t? What is its digital maturity and how does it compare to the company’s peer group?
This process can be like tugging on a loose thread of a sweater. For instance, a business that is not retaining customers at a satisfactory rate might want to review its customer support practices or examine the contact center. Are customers getting the help they need when and how they expect to receive it and are the digital tools available to customers and employees sufficient to support customer service and success cycles efficiently? Are the services reps triaging issues effectively? Is there a disconnect between the sales and service teams that could be causing churn and lower than expected retention numbers?
The more you tug at the thread, the more you discover what may have seemed to be a digital capability issue is really a process issue or a cross functional communication issue that requires thinking about the digital capabilities in a new or different way.
In the above case — as with the majority of issues — digital tools are not the sole problem area and cannot be prevailed upon to solve the issue in a silo. This will be true for many other issues organizations face throughout their digital transformation efforts. Businesses that succeed in transformation efforts are those that clearly identify root causes and then define how the transformation can improve efficiencies and ultimately lead to more satisfactory outcomes.
Q. How do I get started?
Transformations are arduous. They require people, resources, and time — anywhere from a few months to a few years. That makes securing executive support — the crucial buy-in — from the top and the middle levels essential for a more extensive and successful transformation.
These three steps should be presented as part of the plan:
1. Honest assessment of where you stand
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Understand what you have and what you need through assessing your operational and digital capability maturity; use benchmarks and other desk research against peer group, industry and digital leading practices. Often looking outside your industry can be helpful to reflect on where your industry stands amidst broader economic change.
2. Transformation Blueprint
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Craft a business case for digital transformation that focuses on optimizing or adding critical existing capabilities in the near term and the addition of innovative future looking digital capabilities for the mid to long term.
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Define a digital strategy that is aligned to the overall business strategy for winning in the digital economy and then using the capabilities assessment to blueprint platforms, operations and an organization that can support and evolve with the business.
3. Plan & Mobilize
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Establish leadership buy-in and support early and often; ensure key stakeholders are aligned to the strategy and solution.
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Define workstreams and teams to realize digital transformation strategy and solutions. Establishing a transformation office for a period of time can help with focusing the program on achieving outcomes.
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Consider setting up smaller incubation teams early that can help build execution muscles while the larger program picks up momentum.
It may help with buy-in to offer a glimpse of what a digitally mature company looks like. Some of the attributes:
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Seeks an agile, data driven mindset adapting to change and new business models more quickly.
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Focuses on measurable outcomes for all their stakeholders.
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Seeks to experiment and learn quickly from setbacks.
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Excels in the self-destruction of inefficient processes.
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Delivers through nimble and empowered teams.
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Runs on modular and elastic technology platforms and data infrastructure.
Conclusion
All businesses can fall into a common trap: going straight to the flashiest solution, like buying the hot new digital platform or incorporating machine learning solutions. Businesses need these tools because their competition is outpacing them or because of customer demand. But real and lasting transformation is a long introspective process, where a business is improved not by buying the latest technology but by looking to their constituents to define what’s working and what can be transformed into something newer, faster, and better than before.
For further information, please contact:
Sumeet Gupta, Senior Managing Director, FTI Consulting
sumeet.gupta@fticonsulting.com
