Updated: Jun 5
By Harry Mamangakis, Digital CIO
#covid19 has been a trending hashtag on LinkedIn, over the past few weeks, reaching around 632k followers, and surpassing other trending hashtags, such as #digitaltransformation that has around half that number of followers…
The two were correlated in the very successful meme, we have all seen where a question is asked: “Who is leading your Digital Transformation initiative?”, with possible answers being “a. The CEO, b. The CDO, c. COVID-19”.
Jokes aside, over the past few weeks we have observed events like webcams becoming as scarce as surgery masks, interest in solutions for Digital Onboarding, Digital Shopping and Payments reaching a peak, and so on.
We have seen executives taking pride, that their companies were able to adapt quickly, while others taking heat for the opposite.
Defining Digital Transformation
Let’s take a step back, and rethink a bit, what we mean by #digitaltransformation…
Is it an end or an ongoing process? Should we be talking about Digital Fluency and Digital Maturity or about a Digital Transformation Plan with specific outcomes and an end state?
If someone was to ask several different people “what digital transformation means” (for their organisation), it is highly likely they would be given different “definitions”, as each person asked, would answer from their own “perspective”. The CEO would focus on “quick execution”, the Customer Care Executive would stress “Customer First” and the CIO would talk about things like “Agility and Architecture”.
Who is right and who is wrong? Or are all these answers, partially right? Well, this can be answered by looking at organisations that we all consider as good examples of “Digital era organisations”. They all have some common characteristics:
They allow customers to be in control (as customers expect to be)
They allow customers to interact with the brand from anywhere, at any time, and to do nearly anything. All of this while always being in the correct context and in real-time
They are able to quickly adapt to changing market conditions, in a matter of days
They embrace technology
If we were to codify the above characteristics, we would say they produce the three basic dimensions of Digital Transformation:
“Passion” for the customer
Technology at the core of the organisation
Let’s briefly discuss each one of them, to ensure we are all aligned.
1. “Passion” for the Customer
Passion or Obsession for the customer means delivering real value to the customer. This requires looking at things from the customer’s perspective.
Only from this perspective, one can understand what “customer value” is. Otherwise, it is very difficult to define it. Let’s review two examples that show a wrong perspective.
Example 1: A CIO of a bank brags about their new “Big Data” platform, that allows him/her to “tell business who needs a loan” and therefore allow them to deliver new products.
Example 2: A Commercial Officer of a Telco stating that the solution to simplifying their complex product portfolio, is to create “unlimited usage plans (for data, voice minutes, etc.)” for everyone. Why does example 1, have the wrong perspective? Because no customer wants a loan! A Customer wants/needs to buy a house, or a car, or to finance their business, and so on. So, the CIO (and hence the “business-people”) are looking at things from the wrong perspective. They are looking at things “from the inside-out” view, instead of the “outside-in” view. This would result in an “inefficient digital strategy”. Why?
Because by focusing on “who needs a loan”, the bank would probably come up with initiatives that would deliver things like “digital wizards to help the customer select their loan”. If the bank understood what “customer value” really was, they might have instead opted to create let’s say a marketplace for home buyers and have automated/ digitised the loan application process after the customer had selected a home, in a single and simple customer experience…
This would have set to motion a completely different game plan: It would have required a completely different strategy, a completely different type of team to be set up to deliver the specific customer experience in question. It would have required partnerships with real-estate providers to be established, and of course, completely different technical/technology solutions would have been delivered.
Why does example 2, have the "wrong perspective"?
Because the customer doesn’t need “unlimited data”. What the customer wants, and needs is to be able to have their kids stream safely and without worrying about excessive charges, stream a movie in 4K, be able to communicate whenever needed or to quickly download/upload a big file for work, and so on… That is, the customer needs:
Peace of mind
The feeling of control
…for their entertainment, communication, and connectivity needs. One could argue that "unlimited data" does provide you with "peace of mind" and the "feeling of control". Sure, but it lacks personalisation. Again, the point here is the perspective.
So the Telco Commercial Officer would need to align the new offering around these 3 principles, rather than forcing customers to pay a premium (even a small one) for “unlimited data” (which by the way almost always falls under some “fair usage policy” in the fine print).
It is easily understood that delivering customer value should be at the center of your transformation strategy and shape your business model. Financial KPIs like profitability, are the result of this strategy.
2. “Being Agile”
Let’s first start by defining what business agility is: The ability to adapt to an ever-increasing speed of change in order to deliver real customer value.
Why “ever-increasing” speed of change? Because customer expectations have heightened by the speed of current breakthroughs, which have no historical precedence. The rate of change is evolving at an exponential rather than a linear pace…
Think about it. It took about 38 years, for radio to break communication and distance barriers and reach the critical mass of 50 million users… Television required about a third of that time (13 years) while the internet required again one-third of the time (4 years) to reach the same landmark… Facebook needed just one year, to reach 200 million users! Today with the penetration of broadband, mobile networks, smartphones, social media, and other technology advances, customers expect to be able to do anything, from anywhere and at any time. The rate of adoption of new advances is measured in days… What? You cannot deliver on this? Well, you are obsolete.
According to a 2018 study (by Innosight), the average tenure of companies on the S&P 500 list was 33 years in 1964, 24 years by 2016 and it will be 12 years by 2027. This means around half of the current S&P 500 members will be replaced over the next 10 years. Adapt or be extinct. The era of “Digital Darwinism”. (Brian Solis, Digital Darwinism, 2011).
Many Digital Transformation initiatives fail at this dimension (Agility) and as a result, cause the entire Digital Transformation initiative to fail. There are a number of reasons for this.
One common reason is the “Messiah approach”. Management will bring in an “agile expert” who will be assigned the task to “transform the organisation to an agile one”. This is a doomed approach. This “Messiah” will face cultural, functional, organisational, and other obstacles and in the end will simply give up.
Another reason for failure is the “Water-Agile-Fall” approach. In this approach, the organisation focuses on transforming the “implementation” part of delivering customer value to adhering to agility principles and methods. However, the traditional decision-making required still maintains its “waterfall” approach: An idea for a new product or service or a change needs to come up with a business case to secure funding, pass through an approval process, and then be scheduled for implementation. This process is serial and could easily take months. So, no matter how much you have optimised your delivery, you are still not able to adapt as fast as required.
Trying to copy approaches used in other organisations like Spotify, also fails, as every organisation needs to find its own pace, and your approach must fit your organisation and not be forced on you. There are numerous examples of failed “copy-cat” approaches.
So, what does an organisation need to do?
Well, this is a whole discussion in itself, perhaps the topic of a future posting. However, the basic characteristics an “Agile Organisation” has are:
Orientation on business outcomes that deliver specific customer value
Responsive to market shifts
Culture of experimentation to allow it to be able to test and learn in order to tackle uncertainties
Strategic use of Information assets (decisions based on data and not only on intuition)
“Agile” Structure and Governance
Transforming your organisation to become more agile isn’t easy. It will take courageous leaders and a strong commitment to stay the course and avoid being stuck in transition because of the constraint of compromise, cutting corners, and convincing yourself “it’s a step in the right decision”
3. “Technology at the Core”
Just 13 years ago the companies with the largest capitalisation globally were:
Exxon Mobile, GE, Microsoft, ICBC, Citigroup, AT&T, Shell, Bank of America, Petro China, and China Mobile
Today they are:
Aramco, Apple, Microsoft, Google (Alphabet), Amazon, Facebook, Alibaba, Berkshire Hathaway, Visa, and JP Morgan Chase
The changes are obvious.
There are other examples of companies that have disrupted traditional industries by having technology at their core:
Tesla considers itself a “software company” that delivers “hardware” (the car) as the means to realise the software experience.
This is also aligned with what Apple executives claim in every keynote presentation they have for a product launch.
Uber disrupted the transportation industry, without owning a single taxi or car.
Traditional manufacturers like Daimler are following the trend. Daimler claims in the “Strategy Section” of their site that their goal is to become a leader in providing “mobility services”. Daimler invested in “mytaxi” (which acquired Taxibeat), Zipcar, founded Moovel, and so on. Such investments allow new opportunities for Daimler to deliver value to their customers and to enter into new markets.
Other trends include insurance/health providers focusing on “healthy lifestyles” in order to prevent diseases. This is done again, by the use of technology such as smartwatches and other gadgets.
Digital technology is forcing companies in all industries to reexamine the very basic question of customer value. Please recall the example with the bank and the loan, that was previously mentioned.
Digital Technology at the core, therefore, means ensuring technology acts as the enabler for the other two dimensions:
Allowing Customer passion by delivering real customer value with a focus on the key values of Peace of Mind, Feeling in Control, Personalisation
Allowing the organisation to be as agile as required
There are numerous technologies, architectures, delivery methodologies, operational models and so on that allow the relevant organisation stakeholders (IT or a Digital Department) to enable the two mentioned dimensions. These again can be the subject of an entire discussion.
Netflix is a great example for both “Technology at the Core” but also for Digital Transformation, in general. It realised that customer value exists in original content, so it transformed from a content distributor to a content producer, while allowing the customer to feel in control of their charging by being able to cancel and restart subscriptions at any point, have peace of mind “it will always be there when required” and with no hidden costs, and by delivering personalised experiences (more than 80% of watched TV shows come from the personalisation engine).
To achieve such results, you need to bring the language of technology to all levels of the organisation, even to the board itself! Long gone are the days where the mentality was “we are a “commercial” company above all”. …
When change is the only constant, when the rate of change, is ever-increasing, we cannot discuss about Digital Transformation being a goal, an end.
We should be talking about Digital Fluency or Digital Maturity. Your game plan should rotate around the 3 dimensions: Passion for the customer, Being Agile, and Bringing Technology to the core. These 3 dimensions will help you measure your digital maturity. The exact steps you will take to define your Digital Transformation game plan must fit and target your specific organisation. In future posts, if there is interest, we can have deep dives into each of the above dimensions.
Credits & References This post has been inspired by published works of various bright minds such as Martin Fowler, Jez Humble, Gary O’Brien, Dan North, Kevlin Henney, Klaus Schwab, Brian Solis, and many, many more. There are two books, that deal with the majority of the topics mentioned in this post, that I would highly recommend:
“Lean Enterprise: How High-Performance Organizations Innovate at Scale” by Jez Humble, Joanne Molesky, and Barry O’Reilly (O’Reilly, 2017, 10th release, ISBN: 9781449368425)
“Digital Transformation Game Plan” by Gary O‘Brien, Guo Xiao and Mike Mason (O’Reilly, 1st Edition, November 2019, ISBN: 9781492054399)
In fact, IMHO, CEOs should make the above two books a mandatory reading for their companies.