Digital transformation goes beyond customer experience

There's a damning finding buried in Altimeter Group's recent report on The 2014 State of Digital Transformation, by principal analyst Brian Solis. Almost half the companies investing in digital customer experience initiatives admit that they have no clear idea of what it is they're attempting to achieve:

42 percent ... have not officially researched the digital customer journey but have updated digital touch points with new social and mobile technologies and investments.

As a snapshot of current practice (far too premature to label these paltry efforts as best practice) this is a useful document. But it's chock full of 'facepalm' moments that reveal how primitive the state of digital transformation remains in most enterprises.

This is even more shocking when you consider that the report specifically focuses on digital customer experience. This limits its investigations to those parts of the enterprise, typically under the control of the CMO, that are supposedly most advanced in adopting digital technologies, driven by the need to better engage with digitally savvy customers. As the report's introduction explains:

To focus our initial research, we defined digital transformation as a movement under a customer-centric lens:

The realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle.

By focusing our research under this lens, we can better learn how and why companies explore digital transformation in a particular business area. This makes the idea of change approachable rather than overwhelming.

In spite of the author's efforts to lead his readers gently by the hand into the digital landscape, the overall impression from the report is that many enterprises remain perplexed, fearful and paralyzed by the prospect of digital transformation. They know it's important — they are even investing in it — but they have not yet figured out why.

Amongst Altimeter's advice, three big themes stand out.

Go beyond the technology

Solis emphasizes how important it is to understand the consequence of digital technology for the customer journey. Digital interactions and engagement are not faithful clones of their pre-digital ancestors. As the report notes:

[U]nderstanding the behavior and impact of the new connected customer is at the heart of digital transformation.

We've heard that digital — especially mobile — is often an afterthought or 'bolt-on' program to existing marketing efforts. Yet it is the very thing that is changing customer behavior and preferences.

In other words, digital changes what is possible. Enterprises must map these changes and understand their knock-on effects:

Only once an organization has begun to study the customer journey as it exists today, can it reach a deeper level of understanding around digital touchpoints.

Through completing journey mapping exercises, Discover’s Head of Digital Mike Boush recognized the company's digital transformation needs spanned much further than technology investments alone. Boush commented, "The customer journey online is the heart, and we need to understand how that flows and is mapped out. But after we went through that journey, we wanted to change some of our products."

Join up functional silos

My biggest beef with the report is that, by limiting its focus to the customer experience, it reinforces the functional siloing that has to be broken down if digital transformation is to be successful. This may be an uncomfortable message, but if you don't put it up front and center, readers may miss it altogether. It is in the report but it gets buried deep inside:

Nestlé's Global Head of Digital and Social Pete Blackshaw believes that digital customers necessitate the threading of heterogeneous groups and business units. "The potential of digital is its ability to bridge functions, soften silos, and make informal connections that you typically don't have through reporting lines," he said.

In an era where every business must compete for digital customers, disparate groups must work together.

The report's functional focus is reflected in the top benefits cited for digital transformation, which, it ruefully notes, are skewed towards narrow campaign benefits rather than broader transformational outcomes:

Strategists aimed to increase traffic (52%), increase lead gen and sales (50%), optimize conversion (46%) and amplify the company's share of voice (46%).

Some of these metrics, though, are also indicators of an earlier challenge we uncovered in the survey. Strategists felt that some investments in digital transformation were still driven by a campaign mentality, with 60 percent stating this as an extremely significant challenge.

Challenge the culture

To my mind the most important metrics from the report are shown in the above table — what you might call the 'What's stopping you?' checklist. Inevitably, culture change is number one. As Solis writes:

Without openness to change, either naturally or as a specific initiative, digital transformation stalls. We find cultures are open to change but are stuck in directional ambiguity or risk aversion.

Executive leadership is a huge part of this, but there is an interesting discrepancy in the report. The quantatitive research found that digital transformation was being led by the CMO in 54 percent of cases, followed by the CEO at 42 percent. But in the qualitative research, Altimeter found only 10 percent of cases being led by the CEO. Maybe this was just a skew brought on by the customer experience focus of the report. But it may alse be the case that the CEO's leadership of digital transformation strategies is more titular than actively engaged.

Certainly it was depressing to read of digital leaders being forced to scrabble around trying to amass sufficient evidence to convince doubters elsewhere in the enterprise of the need to invest in digital:

[A]s Adrian Parker, former global head of social, mobile, and emerging media at Intuit and now at Patron Spirits Company, explained, "No one wants to take three years to be world class in digital. But then we don't have the data we need to make the resource allocation happen. We don't internally have the confident data we need to convince leaders or peers that they should invest in some of this new technology or positions or skills that will be crucial to a growth plan."

Verdict

This report does what it says on the tin. It details the state of digital transformation in 2014, within the customer experience function. But it seems designed for enterprises that want to take baby steps in their digital journeys rather than those who are more ambitious.

We are still barely in the early adopter phase of digital transformation. Just like every previous significant technology-enabled shift in business, we are at the moment of highest risk and highest potential reward.

If you don't have the vision to move ahead — if you insist on waiting for evidence before you make a move — then you lose. When you wait until everyone else has joined in and the path ahead is clearly mapped and well trodden, there is no longer any profit in doing so. It simply becomes a necessary cost of doing business.

So how do you move ahead? This is the first in a series I've planned to map out some of the ingredients in digital transformation. The path may not  be clear, but I shall be planting a few more signposts in the next few days.

[Updated] Next in the series: Digital transformation goes beyond mobile to the API layer.

Image credits: Butterlflies © Cathy Keifer - Fotolia.com; Brian Solis headshot and table courtesy of Altimeter Group