Even if you aren’t actively working on digital transformation (DX), you’re probably thinking about it or you’re hearing other executives talk about it. Driven by the pandemic and emphasised by the rising economic instability, the pace of DX adoption has speeded up by three to seven years over a few months.
It’s not only the uncertainty and the rising living costs that are making businesses rethink their digital strategy. Shifts in consumer expectations and a focus on ESG and sustainability have put further pressure on companies to innovate, adapt and act as advocates for change.
A McKinsey study shows that nine out of 10 businesses think that their business model needs to change in 2023 or has changed already, while 64% believe that they need to build new digital businesses to remain economically viable.
Digital transformation has created a scenario where companies that are fast and agile stand to outlive those that aren’t. But embarking on the DX journey requires caution. Trying to do too much too fast or doing nothing at all can both cost dearly. Instead, examine the overall business goal to see what emerging technology can help achieve it. The digital strategy, in this sense, should be a living, breathing thing that evolves alongside the business.
But with so many competing priorities, how does one decide where to begin? Experts say, start with the basics.
Dust off your data
Before you even start to look at bringing in new technology, you need to inform your decision-making by gathering the right data. Many companies still struggle with disjointed or incomplete data and that can lead DX efforts astray. Jon Reay is the founder and CEO of Rewrite Digital, a digital transformation consultancy based in Wiltshire. He advises leaders to start by taking stock of the data they have. “You might not be aware of it but you might be collecting a lot of data from different sources that you haven’t brought together, haven’t interpreted and, therefore, you don’t know how to create value out of it.”
Other than looking at internal data, he advises organisations to look at external sources. “In some cases, combining data between organisations across the sector can provide insights on consumer trends that you might not otherwise have had.”
Once you have clean and sufficient data you can think about which technologies, such as machine learning and AI, will best use it to tackle specific issues.
Invest in core capabilities
Inflationary spikes and a looming recession are making companies think about how to achieve more with less, both in terms of their labour and digital capabilities. Improvements in workforce scheduling, for example, can mitigate issues with labour shortages while automating manual tasks can increase productivity. Ruben Schaubroeck is senior partner and leader of McKinsey’s digital practice in the UK, Ireland and Israel. He recommends taking an incremental approach, where small changes can lead to big results. “The best organisations take a domain-specific view of data, for instance customer service or digital sales, and think about how they can take an end-to-end view of that use case to show a clear impact on customers and employees.”
Once you have your proof of concept, you can replicate that model across other departments and get the buy-in from key stakeholders. What you don’t want to do, Schaubroeck warns, is rip out the whole tech stack and start from scratch. Those strategies rarely get top-level buy-in or work as planned.
On the other hand, companies need to exercise caution about how they build their technical capabilities. So says Barnaby Moffat, who is co-founder and commercial director of KPS UK, an ecommerce and digital transformation consultancy. While many companies oscillate between buying a single enterprise solution or building a custom solution from standalone tools, the most agile businesses usually do both. They buy into a modern enterprise solution and then use it as the foundation for all the other bolt-on pieces.
Moffat explains: “This hybrid approach allows you to move faster and have more control while still having one or two tech vendors be answerable to you. You can then build a suite of best-of-breed at the front end of your business, which is where businesses tend to need agility the most.”
Focus on customer experience
While digital innovation occurs across sectors, B2B organisations often lag behind B2C vendors in customer experience. This needs to change.
Reay emphasises the need for businesses to look outside their sector. “B2B should look at B2C because what they’re doing will come next – giving you a better idea of what needs to change in your industry.”
Experience matters regardless of the type of business you run. Consumers, especially newer generations, can be unforgiving about engaging with brands if the experience isn’t enjoyable and more likely to turn away than to stay. “Customers often move between different touchpoints, from customer services to sales or sales to in-store, and in-store to online,” says Moffat. “If that isn’t joined up, if the customer isn’t given a holistically excellent experience, it can cause a lot of friction.”
One way you can build this single customer view is to capitalise on data. Charlotte Joyce, an independent digital transformation consultant, says that loyalty programmes are still an excellent way to collect customer data while making them feel loved and appreciated.
“Customer loyalty programmes are helping to drive this digital shift – not just for customer experience but for customer retention as well. In this sense, they aren’t just about giving back to your customers, it’s also about getting more back for the business.”
Provided you have the necessary data, you can start thinking about how you can personalise each touchpoint to drive upsells and increase brand loyalty.
Embed digital in your corporate DNA
Digital transformation is often more about the people than the technology behind it. It’s about how you think about and respond to risks and opportunities. Joyce observes that resistance to change is the most common reason she sees DX projects fail, so it’s important to have the right talent in place. “Change management is such an underestimated factor in digital transformation and it needs to be a priority,” she says.
One of her non-tech clients hired a chief technology officer because they realised that digital adoption is an integral part of their business transformation. Other businesses are introducing roles such as a chief experience officer to look at the employee and customer experience, a head of remote to oversee an increasingly distributed workforce and a chief of data to manage the overall data analytics infrastructure.
Looking beyond hiring, it is vital to invest in upgrading the digital competencies of your overall workforce, at scale.
Schaubroeck notes: “We often talk about digital and data teams and reskilling top management but it is important to think about how to retrain your workforce more broadly. There’s often an assumption that we can’t retrain people at scale, but we’ve seen companies be very successful in doing that.”
Practise good digital hygiene
Sustainability, resilience, cybersecurity and risk management are often afterthoughts in the process of implementing new digital solutions. But these elements need to be included at the beginning to build a lasting digital solution.
Does your solution allow you to be more agile in times of uncertainty? Do you have a disaster recovery plan should one of your data centres fail? Do you have a good data governance policy in place which informs your employees how to collect and use data? If the answer is no to most of these questions, you still have some ground-level work to do.
Experts also highlight the need to embrace ESG and sustainability, not only because it’s a major concern for customers and employees but because it can also be a great cost-cutting exercise over time.
Moffat highlights the expansion of the digital hygiene umbrella. “For years we’ve built in automated testing for technical debt, quality, performance and speed. But now, we can also test for energy efficiency.” He notes that companies today can measure the energy consumption of their source code and work to make it more efficient. They can also look at cloud solutions and opt for green data centres instead of traditional servers, which consume more energy. Schaubroeck says that this can also improve your employee value proposition to a talent who is increasingly ESG-conscious.