​Seven lessons on driving digital transformation

Digital is one of the major disruptors within organisations, but are companies creating enough urgency around it? A new Economist report details the state of digital transformation

The pressure is on organisations to optimise the value of social media, cloud-based computing, mobile technology and big data analytics by embracing digital transformation from the top down.

Yet according to a new study, one third of companies still have businesses split between digital and traditional practices, and only one in 20 claim a seamless customer experience across channels throughout the purchase cycle.

So what can companies do better to embrace digital transformation, and which ones are doing it right?

Don’t stop half-way

A new study released by the Economist Intelligence Unit revealed companies ahead of the digital transformation curve have made greater progress in a fully digitally transformed business model and have seen greater results.

The Digital Evolution: Learning from the leaders in digital transformation report, sponsored by Accenture and Pegasystems, was based on a global survey of 444 executives from the healthcare, finance and telecommunications industries. It suggested that digital transformation aspirations are high, yet making progress can be complex.

One third of companies surveyed still have their business split evenly between digital and traditional practices, with most companies admitting their digital processes are only partially integrated. Meanwhile, only 5 per cent of executives surveyed globally were able to claim they had a seamless customer experience across channels throughout the purchase cycle.

Adapt to customer expectations

The growing sophistication of digital consumer technologies such as smartphones and social media platforms means that customers now have high expectations for their digital interaction with businesses. This rapid shift in customer expectations is now seen as one of the biggest drivers for digital transformation, the report found.

Companies ahead of the game showed they are more likely to present a seamless, omni-channel customer experience, while more advanced companies showed success in integrating their digital processes seamlessly into other functions of the business.

“To be truly digital, you have to give your customers that end-to-end experience,” Pegasystems A/NZ managing director, Scott Leader, said. “It’s not good enough to have the front-end bit, like the website or the mobile app. You need to have that seamless experience moving through to back-end fulfilment. And I think the first step there is really a maturity assessment and look at what they need to do to become a truly digital organisation.”

At the same time, companies identified as being ahead of the curve are driven by a wider range of forces. They were more likely to cite the pace of technological chance in their industry and growing competitive pressure as drivers than those behind the curve.

“Meeting customer needs and expectations is the key driver behind digital transformation but really, companies ahead of the curve are keeping ahead both in terms of innovation and those competitive pressures,” Leader said.

Looking at the new age and millennial consumer, Leader said expectations around service have risen substantially higher.

“We’ve seen with Uber, for example, people expecting that level of service,” he said. “They want to know where their car is, when it’s arriving and how long it’s going to take. They want that seamless payment experience until the end, and to walk away a happy customer.

“Another example I could use is Domino’s Pizza, which is really selling technology and the experience of being able to track your driver and know exactly when your pizza is arriving and who your driver is. Customers are now demanding that type of experience.”

Leverage real-time data

When it comes to the core capabilities companies sought to improve through digital transformation, 57 per cent of respondents identified the ability to support real-time transactions, more than any other capability. In addition, over one third cited improving employees with real-time information from any device as a top priority.

Real-time data also played a part in personalising the customer experience and gaining new insights into customer behaviour, the report found.

“Real-time interaction management or real-time transactions, where you’re engaged with the customer, could be along any of the channels - it could be a call centre, on a mobile app or a website, you could transfer between those channels,” Leader explained. “And the customer expects you to know who they are, so if they start on your website and come into your call centre, you need to know what they’re interested in, what their issue is and how to fix it in real time. It is an area that is there much more scope to deliver in.”

Consider separating and externalising digital capabilities

The two most common challenges identified by companies facing digital transformation were finding the right organisation and governance model moving forward.

While the majority of companies have adopted a centralised strategic approach that reports to a c-suite executive, the report found ahead-of-the-curve companies are more likely to set up distinct digital business units in order to introduce new digital practices without the burden of legacy processes and systems.

Ahead-of-the-curve companies also showed a greater propensity to look outside the organisation to boost their digital capabilities. These companies were more likely to outsource their digital processes, invest in digital startups or form joint ventures or partnerships to boost their digital capabilities.

Embrace executive collaboration

Companies leading the way for digital are also more likely to have a chief digital officer (CDO) leading their transformation initiatives, the report found. While over half of survey respondents reported the CIO or CTO holding a primary leadership role in digital transformation, the report stressed digital transformation is rarely a one person job. The majority (69 per cent) of companies have at least two members of senior management taking a primary leadership role in digital transformation.

Leader agreed CDOs will need to have a more collaborative role in organisations as digital transformation takes hold.

“If you look at companies that are ahead of the curve, they have set up a separate unit with a responsive ability for digital and have a CDO who is driving that,” he said. “The report, however, did also flesh out that for the ahead-of-the-curve companies, you can’t just rely on the CDO, you need that push from c-suite executives.

“A good example of effective executive collaboration I’ve seen recently is ME Bank, where you have Jamie McPhee as CEO and Mark Gay as CIO both really driving the digital transformation of their business. And we see that drives the most success.”

Companies like Philips have also embraced a more collaborative approach to digital transformation, which is overseen by both a digital policy board and a governing body that meets every month.

“The governing body includes the CEO and the heads of marketing, IT and strategy,” Philips global head of digital and social marketing, Blake Cahill, explained. “The governing body serves as a place to unblock logjams.”

For CEO and founder of analyst firm Constellation Research, Ray Wang, the role of the CDO is important but transitional, as more organisations embrace the digital evolution. He suggested executives need to become more digitally savvy across the board.

“As with any transformation project, it is good to have a leader in the beginning and a CDO is a great way to get it started,” he said. “But if you still have a CDO in 3-5 years, your company has seriously gone down the wrong path.”

Boost the CMO function’s leadership qualities

Despite the report showing a more collaborative approach with the digital and tech executive leadership, Leader highlighted when it comes to marketing taking the lead on digital transformation efforts, the report showed a surprisingly low number of CMOs playing leadership roles within their organisation.

“The report showed only a quarter of respondents felt their marketing capabilities and functions could fulfil the role in digital transformation and that it was a strong capability,” Leader said. “I see that as a real opportunity for CMOs to collaborate with CIOs, or if they haven’t, to collaborate with CDOs, to really impact the customer experience.”

Don’t wait

According to Wang, many organisations are being driven towards digital transformation by fear of disruption by new competitors in the market.

“This fear of non-traditional competitors, and an awareness of the fact that almost everybody needs to have digital transformation on their agenda, is causing a lot of worry,” he said. “Things are moving so fast and companies that have been built over 100 years are disappearing…digital Darwinism is unkind to those who wait.”

Cahill agreed, and stressed digital transformation remains at the top of the agenda for Philips moving forward.

“We’ve been around for 124 years and we want to be around for the next 124,” Cahill said. “But you won’t even be in business in 2025 if you don’t digitise.”

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