Digital Innovation

The Keys to Driving Successful Digital Transformation

The terms “Digital Workplace” and “Digital Transformation” swirl so prominently in the corporate air these days that it is hard to go a day without hearing them, if not inhaling them. In a recent study conducted by IDG Research for Unisys, nearly two-thirds (65%) of respondents stated that it is “highly important” for their organizations to implement digital business over the next 12 months by substantially modifying their technology as well as their IT processes and resources. The survey identified five key priority areas: mobile application development, cloud deployment, social media, data science, and security.

Digital business transformation requires an experimental mindset that is inclusive of the entire business—marketing, sales, services, IT, R&D, and customer and partner communities. Unfortunately, many companies still cling to a vertically oriented, bureaucratic, hierarchical system of operations and governance, essentially the calcified spine of an operational model that once propelled progress but now erects roadblocks to change. Large companies therefore lack the single most important attribute required for successful digital transformation: adaptability. I believe that a lateral, rather than vertical, orientation must form the basis of a new business model that ignites creativity instead of inhibiting it. I will explore aspects of this model in detail below. First, however, let’s examine the central elements of successful digital transformation.

Keys to Digital Transformation:

1. Make Customer Experience (CX) the top driver of digital transformation. Digital Transformation analyst Brian Solis notes that, “Companies that don’t grasp or internalize the customer journey are obstructed from seeing its potential for optimization and innovation.” In far too many cases, IT and marketing departments still influence technology investments without fully understanding customer behaviors and expectations. Customer experience should be a top driver of digital transformation, and organizations should map their processes to the customer journey, rather than, in essence, asking customers to alter their behaviors to fit an existing corporate process.

a. Understand that evolving customer behaviors and preferences are the primary catalyst for change. Customer expectations and behaviors are dynamic. Effective digital transformation is impossible without an understanding of the changing preferences of existing customers and the new ways of thinking that potential customers bring to the table. Businesses must therefore invest in smart applications combined with artificial intelligence, including deep learning, machine learning, and proactive and prescriptive analytics. It is also advisable to include marketing automation technologies that integrate with both services and sales lines-of-business for improved understanding of customer behaviors.

b. Map out the journey of new, connected customers. Twenty-first century connected customers differ in fundamental ways from customers of the past. It is critical to gather information on their unique attitudes, behaviors, and experiences. IDG Research found that 71% of executives describe the number one challenge their organizations face as understanding the behavior and impact of new customers. Yet only half (54%) of survey respondents have completely mapped out the customer journey. Without such a map, it is impossible to implement truly customer-centric changes that improve the overall customer experience.

c. Familiarize yourself with mobile data and the challenges it embodies. Become more familiar with the challenges inherent in mobile data, and deploy this intelligence to drive digital transformation.

d. Respect and improve the mobile customer journey. “Mobile is just the beginning of disruption in the customer journey,” Solis notes. “With the runway for disruptive technologies still ahead (e.g., wearables, Internet of Things (IoT), artificial intelligence, virtual and augmented reality), companies will need a resilient infrastructure that adapts to not only mobile’s ‘micro-moments,’ but also the impact of all these trends and new devices over time.” Any effective digital transformation strategy has mobile technology as a centerpiece.

2. Focus on the top three digital transformation initiatives:

  • Accelerating innovation
  • Modernizing IT infrastructure with increased agility, flexibility, management, and security
  • Improving operational agility to more rapidly adapt to change

3. Recognize that CMOs and CEOs continue to lead digital transformation. As digitally savvy leaders, CMOs and CEOs must accept personal responsibility for the progress of digital transformation, and must rise to the challenge of leading their companies into the 21st century.

4. Create formalized, cross-functional digital department workgroups. Of the 81% of companies with digital departments, only 40% have a formalized cross-functional workgroup. This deficiency directly impedes the development of a laterally oriented structure that fosters innovation. Create a strong group of four to five full-time employees that focus on digital transformation.

5. Embrace digital transformation efforts and eliminate “fear of disruption.” According to Solis, “Another top challenge facing digital transformation is the very thing that governs the course of business: a culture that is pervasively risk-averse (63%). Boards, shareholders, and stakeholders want to make improvements and increase profitability but are often unwilling to examine and change the governance in place today.” Understand that disruption helps create new customers, products and markets. Embracing disruption spurs future growth.

6. Create short-term plans for digital transformation: The digital world changes frequently. Create short-term plans for growth that leave room for updates and the inclusion of new technologies.

7. Create a multi-disciplinary digital transformation approach. Accelerate innovation by launching a formal “innovation center” to promote the testing and understanding of new technologies and the development of new solutions and services.

8. Combat internal barriers to progress and expand innovation by partnering with startups, investors, entrepreneurs, and universities. These partnerships accelerate the adoption of new technologies, shortening the timeline for digital transformation.

9. Exploit the combination of an innovation center, partnerships with startup ecosystems, and a focus on concept development and product innovation to boost digital transformation ROI. Create a plan that combines multiple areas and harnesses the strengths of each one. Improved cross-sector understanding will facilitate ongoing collaboration and ensure that every sector continuously tracks toward enterprise-wide digital transformation goals.

Implementation and the New Business Model

A recent Huffington Post article serves as a good reference on the six stages of digital transformation identified by Solis, and on how mature companies implement emerging technologies. Yet no matter the level of a company’s commitment to proceeding through those six stages by adopting the principles detailed above, adherence to a 20th-century business model will bring the most well-intentioned efforts at digital transformation to a grinding halt. A new, laterally oriented business model must underpin any digital transformation initiative if the potential ROI is to become a reality.

Social applications of digital technology offer a world of new possibilities for organizing and orchestrating work inside an enterprise. Whereas hierarchical communication structures tend to breed the very sort of toxic, manipulative corporate culture that has driven so many talented people away from large firms, cross-departmental social engagement fosters a spirit of collegial collaboration, boosting morale and productivity at once. Such a model promises to reshape the way executives and employees alike think about internal support functions, by focusing those functions on creating, maintaining, and improving the individual micro-services that form the heart of the organization’s operating platform.

From a management perspective, embedding rules, processes, and workflows in the platform itself is both simpler and more reliable than using manual control methods to enforce them. From a technology perspective, the organization can create an integrated, internal user experience layer that brings together what is usually at present just a collection of point solutions and off-the-shelf software. From the perspective of employees, this shift toward lateral integration cuts the puppet strings that control them from above, instead weaving processes and workflows into a supportive platform that becomes a stage on which to shine. Stage directions still provide guidance, but employees become actors with greater freedom to perform.

Benefits (ROI) and Challenges of Digital Transformation

Research has demonstrated that effective digital transformation realizes the types of ROI any C-suite or board appreciates…

  • Increased market share (41%) and increased customer revenue (30%).
  • Improved employee morale: 37% of respondents stated that second to increased market share, employee engagement was the next big return.

…but it will not happen overnight.

“Digital Darwinism favors those companies that invest in change,” Solis observes. However, he adds that, “Digital transformation isn’t easy though. Its true evolution takes time and resources, with benefits delivered in the long-term. This, to some, can represent deliberate moves away from delivering against quarterly returns. That’s the paradox of investing in digital transformation; it gives returns to those who treat it as a long-term investment versus those who expect immediate impact,” said Solis.

Measuring Outcomes

“Digital strategists must still rethink metrics to chart future development in new channels, experiences, content, and devices,” Solis explains. “Existing KPIs help validate early work in digital transformation. But often, measurement efforts are focused on measuring isolated efforts within each department/function. For example, only 22% of those surveyed cited having a content strategy in place that addresses customer needs at all journey stages, but content analytics are in the top five most important metrics measured. There is disconnect between strategy and measurement in digital transformation efforts.”

Therefore, once the new business model is implemented, exploiting the emergent cross-sector connectivity to develop metrics measuring all stages of the customer journey is crucial.

Measuring internal progress toward transformational goals is equally important, and equally difficult. An Enterprise Social Network (ESN), internal collaboration system, or social intranet is a powerful tool to address this challenge. The network can serve as a human sensor array to help guide improvements to the organization and its functions over time. Input must be sought from people at all organizational levels to identify the key capabilities the organization should possess in order to fulfill its strategic goals and respond to emerging threats and opportunities in its markets.

At the leadership level, these capabilities are typically broad and strategic; at the departmental level, they are often quite tactical; and, at the level of individual teams, they might consist mostly of simple tweaks or solutions to bureaucratic pain points. The ESN facilitates gathering these capability targets as agile user stories. Progress can subsequently be measured using a combination of available data (e.g. Social Network Analysis) and by querying the human sensor network, which will also contribute strategies to realize particular target capabilities.

This simple framework provides a way to bring together all transformation actions within the organization, both those planned and those already underway, and to view them through a common lens of capability development.