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Five Rules For Successful Digital Transformation

Forbes Technology Council
POST WRITTEN BY
Nitin Seth

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That everyone is trying to go digital is well established. Yet organizations continue to grapple with achieving breakthrough business impact from digital transformation programs. In my previous article, we saw that a digital business is fundamentally different from a traditional one: The customer is younger and more demanding; there is an explosion of data; velocity of change is unprecedented; technology is not a support function, it’s at the core; a "right the first time" approach does not work; and lastly, digital problems are highly interdisciplinary.

The inability to recognize that digital businesses are radically different from traditional ones leads to both failure of vision and failure of execution in digital transformation programs. It is imperative that enterprises recognize that they need a new mindset and a new approach to succeed in the digitally disrupted world, or else they risk losing unrecoverable ground to the digital natives.

I want to share five principles to achieve transformative success in your digital journey.

1. Rethink The Business Model

Industry value chains are becoming disintermediated. The end customer, who was once a few steps removed, now interacts with your enterprise directly. You need to rethink your business model to benefit from this disintermediation and to engage with this younger, digitally-savvy customer. You also need to rethink your products, pricing, customer touchpoints, service delivery models, etc. As you evolve the business models, you cannot be afraid of cannibalizing yourself. Business model decisions are often limited because of the worry that some of your revenue from an existing channel or service line might be impacted. This incremental thinking does not fit in the digital age. If you don’t do it, someone else will come in and cannibalize you.

2. Focus Obsessively On Business And Customer Outcomes

Digital transformation initiatives can end up becoming massive, never-ending projects, and it is easy to lose sight of what one set out to achieve. In my experience, the ideal way to start is with sharply defined key performance indicators (KPIs) which will have the most material impact on your business. Once the business KPI is defined, it should become the anchor for the entire transformation program. Business KPIs should flow from your strategic priorities, such as increasing the digital channel mix, increasing cross-sell or up-sell or improving customer retention. Once you have chosen the business KPI as a starting point, the next step is to identify and solve customer pain points that will move this business KPI. Sharp focus on business and customer outcomes will help you keep focus and ensure that you are solving the right problems.

3. Harness The Power Of Data

In my previous article, I spoke about the phenomenal opportunity for businesses to harness available data to understand customers deeply and offer more personalized experiences. The key to successful optimization, whether a customer journey or internal process, is analytically sound, data-driven decisions. Effective use of data science is truly the "secret sauce" in digital optimization. Algorithmic decision making based on data wins over human discretion. However, 90% or more of the focus in data initiatives, both in time and money, is usually on getting the data prepared and bringing it together in a data lake and less so on utilizing data for drawing out insights and decision making. Reverse the approach; first, figure out the decision you want to make, then go about collecting data for it. As you anchor around the problem you are trying to solve (driven by the business KPI), you will realize that your data management efforts will also become more focused and manageable.

4. Adopt An Integrated, End-To-End Approach

Large enterprises are shackled in siloed structures that are a function of their legacy businesses. This is a huge challenge for digital programs, as digital by its very nature is interdisciplinary. You need to put in place new structures that allow for simplified cross-functional collaboration, swift decision making and an integrated approach. Your operating model needs to enable "aligned autonomy" — ensuring end-to-end capabilities are brought together and there is ownership for the outcomes, yet there is clarity and alignment on the business outcomes to be achieved.

Many consumer internet companies have solved this by empowering business success managers or product managers who have end-to-end ownership and accountability. The product manager plays the role of an integrator who takes a customer-centric view, understands both business and technology, and works as a connector bringing together different capabilities and initiatives required to achieve the outcomes.

5. Use A Two-Speed Implementation Approach

Going “Big Bang” is, in my experience, a recipe for disaster given the iterative nature of digital. At the same time, focusing on narrow, ad hoc use cases has limited impact. I strongly advocate for adopting a “two-speed” approach — focusing on high impact use cases that will really move the needle to begin the journey while also leveraging the successes to build up your data and technology platform. Over successive agile implementation cycles, a two-speed strategy will allow you to solve for the most pressing business problems while developing a scalable platform.

Two-speed implementation is relevant not just for technology programs but also for business strategy. Adopting multi-year, fixed business strategies is a kiss of death in a world where customer needs and available technology are both changing very rapidly. In this paradigm, business strategy should be agile and driven by your execution experience.

Organizations will achieve success in their digital transformation journey only if they recognize that digital businesses are fundamentally different from traditional ones and need a different response. It requires end-to-end business transformation starting with a compelling vision and following up with smart ways of ensuring successful execution. Merely approaching digital transformation as a technology project will yield only limited results.

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