The Whys of the digital transformation explained to the C-Suite

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Digital transformation programs are flourishing inside organizations whatever the name they’re given. No matter if things start wich collaboration, customer relationship, learning organization etc., all end at the same place once the ball have been fully unwound. And once this point is reached, nearly everyone agrees to say that the means seldom live up to the challenge.

That’s else obvious for customer facing initiatives. Because external initiatives are visible, are a matter of branding and because businesses always remind where money comes from. So even if not everybody has reinvented the  customer experience and service we can see interesting initiatives that, even shy, are a good first step before bigger ones. On the other side, internal initiatives are still seen as window dressing rather than actual reinvention. If the means – some will also say the courage – are proportional to the stakes, the least we can say is that the stakes are poorly understood.

So what is digital transformation the answer to ?

New customer behaviors ? Gen Y and Digital Natives ? Consumerization of IT and business practices ? Enterprise image and employer brand ? Being in fashion ? Need for collaboration ? Innovation ? There’s a little bit of all that but nothing big enough to put the organization upside down. Enough to justify tactical initiatives, not enough for reinvention. Between clichés and need to brighten-up, the C-Suite will often say that “this is your problem, not theirs”.

But some approaches manage to grab their attention.

1°) Arguments that relates to the market

We’re witnessing what we can call the servicization of economy. Nothing to do with be development of the service sector. Here it’s about the offer, what’s being sold and produced : businesses and customers now consume services instead of productions. It’s not either about the common discourse on the digitization of economy that can scare or make laugh those who understand that an economy without tangible goods is not possible.

When products become services

Tangible goods are not dead. They’re only embedded into offers that mixes goods and services. That’s something we all can see : mobile phones, software as a service, businesses not buying fork)lift trucks but a handling service. Even the services industry is impacted : now we talk about service integration what is nothing more than an ad hoc offer mixing existing services that used to se sold individually in a new, specific and unique fashion for a given customer.

It impacts the way the customer consumes what he buys, the way it’s being delivered, the scope of the engagement of the provider ect. What matters here is that it deeply impacts the way an  offer is designed, sold and delivered. There’s a need for :

• a strengthened collaboration with the client during the pre-sales and sales phases because it’s often about building an ad hoc/specific/unique offer.

• a strengthened collaboration inside the organization because existing offers have to be identified across silos as well as know-hows, skills and experiences and, once done, the people in charge need to work together. The same applies when it comes to deliver the offer.

Of course, all or part of the service can be delivered digitally.

2°) Arguments that relates to how the offer is valued

There are two ain trends here : use value and experience.

The use value is not my point here. We just need to notice that customers don’t value the “physical” value of a product but the value he gets by using it.

More interesting is the move toward what is called the “economy of experience” and has a couple of things in common with the use value. To make it short, it means that customers value their overall experience and not only the product/service they buy. From their relationship with the seller before being a customer to the after-sales relationship and service, including sales and implementation, they don’t judge the value of the offer based on objective and quantifiable criteria (price/functionalities/content) but on the way they live their journey and the experience they draw from it.

The Customer experience is more valuable than the product itself

What explains why the company with the best product is not always the most successful one, that a high level experience allows higher prices even if the product is not better.

3°) Arguments that relates to performance

While productivity did not stop to improve over the 30 last years, the ROA (Return On Assets) did not stop to drop. As shown by Deloitte’s Shift Index that highlights many paradoxes between performance numbers and the reality of the economy, this disturbing crossing of the curves is mainly caused by the failure to embrace digital technologies. Both from a collective (the organization) and individual (employees) perspective.

When employees pedal faster and the company goes slower

In other words, aware that value creation is moving to intangible approaches, businesses invested a lot to face these new challenges. Talents, skills, customer relationship, reputation, technology etc. But they struggle to make the most of it because too few employees have the skills to work differently and because organizations have been incapable of adapting the way they work, their processes and value creation model in this context.

It’s impossible to create value in an economy that makes an intensive use of knowledge (a term I prefer to knowledge economy because it makes it easier to understand that knowledge matters even in the manufacturing industry) with a model optimized for a “physical” economy that makes an intensive use of tangible assets.

In short : if employees pedal faster and the company moves slower, the problem is the driving belt.

It’s, in my opinion, the more alarming signal. Both harmful and backed with numbers, denominated in dollars.

Digital transformation is about a new model, not new technologies

Some may say that these arguments are far from the digital field. It would be a mistake. Before being digital, a transformation is a transformation. What is mentioned in this post is :

– the nature of the offer and the way it’s designed and delivered.

– some differentiating elements on value from a customer perspective.

– how to make the heavy investments made in intangible assets profitable.

The transformation impacts all the value chain : from the market to the raw material, including the producing process and the investments. Digital is a part of the transformation toolbox, for example :

– through new collaboration approaches that can work at scale

– through a new way to think and deliver an exceptional customer experience

as the machine on the new production line.

And as elements for a new corporate culture and management philosophy.

Now that one of these points, market transformation, change in offers or investment profitability has grabbed the attention of your CEO, you’ll need to move to the next step  : how does the response look like.

The answer in a future post.

  • Kent Henderson

    Digital transformation is an inventorying process. I agree with you that you don’t need flashy technology, just the RIGHT technology. If you think about it, there have been fantastic inventorying tools in market for decades. They just haven’t been adopted or seen as the means to digitize legal matters– until recently. Here’s how Stinson Leonard Street did it. http://www.docsolid.com/wp-content/uploads/2015/05/Stinson-Leonard-Street-LTN.pdf

    1) It CAN be done
    2) Just make the decision to be serious about it
    3) Be prepared to measure the financial outcomes on which you’ll hang your hat, because they are profound.