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Digital Transformation Strategy: The Most Critical Factor to Consider

by Meng Guan
November 27th, 2018

Digital transformation is a black swan

 

For a long time, digital transformation (DX) seemed to be part of the jargon that was merely relevant to IT companies and startups. However, as robotics, big data, IoT, AI, deep learning, VR, 3D printing and blockchain are becoming ubiquitous and part of our everyday lives, what was once a choice has now become an imperative. As we approach 2019, your organization should make digital transformation a top priority.

Digital transformation itself is a black swan event – it is surprising, expected but unpredictable. Once it appears, it will become rationalized, visible and impactful. Although it is a rare phenomenon, it has radically changed the course of history, and will continue to constantly reshape our world.

Industry 4.0, which opens possibility for every industry to automate processes and migrate to the Cloud, has made digital transformation a matter of life-and-death for any business. It has little to do with whether you are a tech company or a well-established traditional multinational (here I don’t need to mention the same old platitudes of Tesla or GE to prove a point).

In the foreseeable future, digital transformation will evolve as a paradigm of “all the time, everywhere and for everyone”. Following the side effects of the black swan, our world will be even more shaken up – the most disturbing “Black Mirror” predictions are becoming reality (just think about the China social credit system). Simply put, change has become the new normal, and no one is immune. Do you have a digital transformation strategy in place?

Conceptualizing a digital transformation strategy

– 3 different perspectives & use cases

Operational process transformation:

It focuses on performance improvement and operational excellence by digitalizing processes and enabling data-driven decision-making. Process-oriented methodologies such as Lean, Six Sigma and BPM can help greatly to enhance best practices, quality control and continuous improvement. Effective business operations along with collaborative digital culture will help organizations achieve digital transformation with strategy-to-execution alignment.

Case study:

The Aldo Group, a global shoe retailer, has been trialing new warehouse system that bridges gaps between online and offline world. Their digital transformation started with using mobile apps and digital devices that connected customers to in-store sales associates to track and request a shoe size in real time, and rolled forward later with the use of iPad to showcase different “looks” of a product and associated recommendations of the product. Through merging online and offline elements, Aldo is highly responsive and reflective to customers’ needs for product browsing, enquiry, and distribution, especially for seasonal, on sale and high demand items. The gross margin performance also improves with optimized inventory management.

Customer experience (CX) transformation:

It focuses on customer understanding (habits, behaviors, trends…) and customer relationships by improving customer services and deepening customer engagement. This approach requires thorough insight and analysis of your audiences before you take any initiatives to transform customer experience. If done properly, organizations can attract and retain customers, generate higher profits and ROIs, and obtain a competitive advantage more easily.

Case study:

Tangerine, Canada’s leading direct bank, disrupted the traditional brick-and-mortar banking by offering personalized solutions to all customers. Initially a niche saving bank, Tangerine was no different from other competitors until it strived to offer faster, simpler, more transparent and seamless service. Tangerine co-created a “one and done” digital experience with customers and built win-win relationships, resulting in award-winning customer satisfaction year after year.

Business model transformation:

It focuses on innovative digital offers (products/services) by integrating new technologies and platforms for a more robust infrastructure, and extending or transforming existing portfolios into the market place. After a re-evaluation of the existing value proposition, organizations need to make necessary adjustments, even formulate a brand new go-to-market strategy in order to better meet the ever-evolving challenges of the business landscape.

Case study:

Released in 2011, WeChat started as an instant messaging app but soon evolved into a comprehensive platform including: messaging, social media, gaming, shopping and payment. Now, WeChat is one of the world’s largest multi-purpose apps with over 1 billion monthly active users. What’s the secret of their success? The unique value proposition of building one “mobile lifestyle” end-all platform that touches various aspects of users’ lives and differs from other standalone apps.

The sticking point: customers

 

To catch the black swan, bear in mind that customers are, first and foremost, critical of your overall digital blueprint.

It is easy to lure yourself into the common pitfall of deploying all possible technologies when it comes to digital transformation – a lot of companies exclude customers from their consideration when making significant investments in digital efforts. However, it is not about “what” you do, but “why” you are doing this that actually matters. That being said, you don’t spend on technology for the sake of “doing digital” (just like Amazon did not buy drones only because they are cool); you use technology to better serve a purpose, and in the case of digital transformation, you are “being digital” to further satisfy your customers in today’s digital arena.

Customers are the most vital factor in your digital transformation strategy. The aforementioned approaches have different focuses but all begin with a conceptualization from the back-end: customers. Putting yourself in the shoes of customers is the only way to pinpoint what problems need to be solved, which technologies are necessary, and what tactics you can use to make your brand matter to your customers.

There is no doubt that reducing costs and improving efficiency is important to a business’s survival, but only focusing on technology itself won’t guarantee success. On the contrary, bombarding your customers with a plethora of the latest technologies can increase the risk of losing them to your competitors due to inconsistent touchpoints, fragmented experience and poor engagement.

Furthermore, the most successful digitally transformed companies have moved far away from being customer-centric. They are customer-obsessed! Zappos outperformed other competitors and delighted their customers by training employees on the importance of customer experience, sharing customer stories (good and bad ones), as well as cultivating a happy and caring culture. Alibaba made itself the “shopping destination of choice” amongst China’s millennials by impressing them with comprehensive service bundles (payment, loans, insurance, tax refunds, and shipment tracking) along with top-tier technology such as its unique “smile to pay” feature.

3 stages of customer focus

  • Customer-awareOrganizations meet customers’ base expectations and core needs; they benchmark industry and competitors’ practices to decide performance metrics and standards. Through educating customers about the product and service, organizations raise their brand awareness whilst protecting customers’ welfare. Customer service is poised to create satisfaction.
  • Customer-centric: Organizations strive to meet customers’ explicit requirements and higher level desires (i.e. spiritual ones). After assessing customers’ perception of satisfaction, organizations aim to offer broader options and customizable features to attract, convert, retain and interact with customers. Organizations instill deep empathy in the culture. They foster long-term customer relationships and emotional connection in order to create loyalty.
  • Customer-obsessed: Organizations start with customers and work backwards – they fully understand customers’ unrecognized needs and implicit expectations, and they proactively delight customers by exceeding their expectations. Customer engagement is recognized as essential to success, and customer service is considered as top priority. Extra value that customers did not expect has been continuously delivered to create evangelism.

Digital customers have new digital needs

 

Customer persona is no longer the same; today’s customers are digital customers. Unlike conventional customers, digital customers are tech savvy. Picture this, they browse online to gather information, head to shop in-store without touring the mall for six hours or talking to anyone, share feedback on various social media channels, ask questions to chatbots and expect to get answers on demand 24/7.

Consequently, their expectations have evolved – they are looking for cross-channel experience with frictionless transitions in between, more personalized recommendations and interactions based on their individual preference and purchase history, to be constantly wowed by innovative new products and services in the market place, also more conscious about their data privacy against information breaches and commercial misuses.

A “one size fits all” approach will no longer delight your customers. On one hand, customer segmentation has become hyper complicated and interconnected, and customers can differ greatly even within the same segmentation. Digital customer journey and its touchpoints, on the other hand, are no longer linear or sequential as was the traditional one. Understanding your target segments’ digital needs is the prerequisite to conceptualize your digital transformation strategy and reinforce customer engagement.

Luckily, social media and data analysis empower organizations to micro-target your customers and cluster customer touchpoints cheaper and easier. Personalized marketing and communication plans can be applied before, during, and after customers’ consumption of your product or service. The omnipresence of mobile has made it easy for organizations to interact and engage with your customers directly at anytime, anywhere.

An end-to-end customer journey is what you really need

 

There exist many offers that you can deliver to your customers: digital novelty, privacy by design, ease-of-use, good price/performance ratio… Customers have skyrocketing demands these days but above all, they are looking for a consistent and personalized end-to-end experience. And this is what you really need to develop in the first place for your digital transformation.

For starters, transferring your customer service, community, marketing and communication plans from offline to online is not enough. Customers constantly seek a seamless omnichannel journey. Hence, creating cross-platform synergies can result in exponential value not only for your business but also for your customers. Information consistency and offer cohesion need to be achieved in digital and brick-and-mortar, on desktop, mobile and tablet, as well as in organic and paid social platforms.

Secondly, harness the power of data collected from your customers is the best way to take the reins. Building a scalable and healthy data foundation can make sure your decision-making and prioritization are all based on customers; promoting a uniform and accessible database can generate comprehensive customer insights for your cross-departmental collaboration. Netflix used data to micro-target regional audiences and produce high quality original programming to accelerate its internationalization. Other examples of using data to smooth out customer journey include American Express, UPS, Yelp, Walmart and more. When it comes to leverage customer data, are you a leader or a laggard?

Last but not least, be people-centric – teach your employees the importance to put customers at heart and collect feedback. Building a digital work place is only the first step of your digital transformation; cultivating a digital workforce to get their understanding and buy-in for your strategy is essential for achieving superior customer experience. Also, don’t forget that promoting a collaborative digital culture will be the “glue” to execute your strategy in a daily basis.

In a nutshell

 

On the waves of digital transformation, you can either make proactive actions or lament over missed opportunities and your customers hold the key to the success of your digital transformation strategy. Keep abreast of the speed of change whilst offering your customers value that goes beyond the purview of their expectations is THE success factor of your strategy. It’s simple but not easy, and it will eventually help your digital transformation come to fruition.

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