What would happen if a fast-food restaurant launched a mobile app to enable customers to place orders from smartphones—but listed for sale items that were no longer available. They could say, “Sorry, folks! We’ll get right next time.” But “folks” are still hungry.
A textbook example of an unsatisfactory customer experience. And it really happened. Ah, digital!
Here’s another one. A financial services firm launched web-based enrollment to access new services. But after customers signed up online, the firm’s back-office employees printed paper copies of the forms and manually re-keyed the information into multiple different internal applications.
An inefficient, error-prone process. And you can guess the result. Digital it’s not.
Just one more. A travel services company sought to increase sales by pushing tour package products through digital channels. But the packages had many variables, with the online platform not able to address all possible permutations. As a result, the online sales managers consistently failed to meet unrealistic targets. The initiative met with strong internal resistance as well, with online marketing being viewed internally as cannibalizing off-line distribution channels.
It failed. Ultimately, the company exited the touring business altogether. It couldn’t adapt its operating model. Digital oblivion.
Serving Up Digital? Get the Recipe Right
Oblivion is an ugly word. Transformation is a better one. And digital transformation is imperative to the survival of any enterprise today. Correspondingly, business leaders are investing heavily in digital initiatives.
By 2018, two-thirds of CEOs in the Global 2000 will have put digital transformation at the center of their corporate strategy. The percentage of enterprises creating advanced digital transformation initiatives will more than double by 2020, from 22% today to almost 50%.
Launching an online channel or mobile application or automating a few processes can be important milestones on the digital journey. But such initiatives are only individual components of what should be a holistic and comprehensive strategy. Digital initiatives fail when they become ends in themselves, without an assessment of their impact on the customer experience, a redesign of business processes, and an evolution of the operating model.
Organizations can more effectively move from simply doing digital to being digital when they consider three factors in every digital initiative.
One: Focus on Customer Experience
Organizations often adopt digital initiatives with the goal of improving customer service. Every initiative needs to be designed with the customer experience in mind. Leadership must continually ask: What is the customer impact? What are the customer’s needs? What are their pain points?
Research shows that the overwhelming majority of customers will take their business to a competitor following a poor customer experience. The impact can be significant—one study estimated that the average potential revenue loss for not offering a positive, consistent, and brand-relevant customer experience is 20% of annual revenue.
Truly digital organizations embrace customer-centricity as a guiding strategy. The goal is to enable customers to design their own experience, even embedding them into previously closed processes and establishing them as a main actor in the value chain. To be effective, such initiatives must deliver a seamless end-to-end experience across digital and physical channels.
Two: Redesign Business Processes
All digital initiatives touch business processes in some way. It’s imperative to design, or redesign, business processes to ensure seamless delivery of digital initiatives, and to define performance indicators that measure their success. Some initiatives change or eliminate existing processes; others create the need for new ones. A digital front-end cannot be effective when it has sub-optimal processes at its core.
To optimize business processes as part of a digital transformation, start by identifying affected processes and determining the type of change required. Then, reengineer existing processes or design new ones, including agile processes that can adapt based on context, and seek automation opportunities within them.
Three: Evolve the Operating Model
Digital initiatives necessitate a review of the operating model. They often prompt a need to consolidate work, merge departments, train people in necessary new skills, and adjust capacity. Digital initiatives that don’t take such considerations into account risk falling short of their goals.
When undertaking a digital transformation, identify its impact on the current operating model. Then, define the target operating model, ensure employee buy-in and participation, determine capacity and skill-set requirements, and establish criteria for success.
Moving Forward, Adapting to Survive
Organizations embarking on a digital journey should:
- View each initiative not as a mere technology intervention, but as a holistic change that creates new value propositions.
- Regard end-users as partners on the journey and involve them in ideation, evaluation, design, and delivery.
- Design versatile processes that can adapt as customer preferences and business models change.
- Design operating models that enable cross-functional interaction to provide the best customer experience and value.
- Create an open, innovative environment by teaching employees new skills, enabling them to own digital transformation and help drive it.
As I noted earlier, simply doing digital describes a focus on isolated initiatives. These can be strategic in themselves, but they don’t amount to a strategy for business transformation through being digital.
Being digital helps a business ensure its survival and growth by focusing on customer experience, redesigning processes, and evolving its operating model from the ground up. That’s the recipe for success: the work is in execution and delivery.
To read more, download my new article, “Getting Digital Right.”