Digital Transformation in 2017 : the end of dreams and miracles

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Hello and happy new year everyone.

As the tradition wants, we’ll start 2017 with some predictions that only commit those who want to buy them.

Let’s start with a quick flashback ont 2016. Even if we can worry about the number of businesses falling behind with their digital transformation, I have quite positives views about the matter.

On the one side there leaders. They got digital and are making their way. Even if nothing is never granted for life, I have no worries for them, at least in the medium term.

Af for others, no matter how far they’re left behind, a tipping point has been reached. Even if they still struggle with the method, they understood that digital transformation was not about applying new technologies on old organizations and processes. They still struggle are deciding where to head, what to rely on but, at least, they’re looking in the right direction.

In this perspective, 2017 will be the end of the belief in the digital dream and miracle. Most businesses already know that or are trying to draw conclusions from their experience. Those that are still living in the land of the digital Care Bears will have to land as fast as possible.

What do I call the digital dream ?

• the belief that transforming the front office (what fashionable people call the customer experience) will lead to success while overlooking back-office transformation will only help to hit the wall faster

• mistaking experience for Wow effect and calling anything an experience. Experience is both an organizational and economic approach that has consequences on screens and at every touchpoint.

• believing, for a B2B business that the result of digital transformation will be as funny and flashy as for B2C ones.

• believing that accompanying employees is enough to put the organization in motion.

• believing that it’s possible to avoid a new financial model.

• believing that transformation can be delegated.

• believing that acquiring digital capabilities will lead to success.

• believing that copying current digital champions is enough.

Let’s discuss this, point by point.

Digital starts with the back-office revolution

In a world that values more the form and the speed than structural mechanisms, digital transformation used to be about things everyone could see and that directly impacted the customer. A lot is being said about customer experience in a digital world, but most of times the concept is lead astray.

I remember of a product demo from a leading vendor I attended this year. The guy on the stage said “in one click I can move blocks on the home page, here I can add a new product category, here personalized recommendations… in two clicks I created a new experience for the customer”. I really got stunned but the audience looked delighted. For too many people , an experience is “stuff than happen and appear on the screen”.

Let’s imagine such an approach works, what will happen then ? More interactions and transactions, all the back-office processes will stressed and customers will be disappointed at scale. Don’t forget that, in digital, technology is about speed and scale so when a “digital and experiential front-office” relies on a prehistoric back-office, everything dysfunctions faster and at a larger scale. Experience becomes frustration and highlights all the incoherences that should have been fixed before. In short, digitization starts with the back office (processes, technologies, skills).

Cult of appearance vs. structural transformations

Lots of businesses learned that the hard way and, in 2017, more and more businesses will lead the back-office revolution jointly with the front-office one, not in reaction to it. What’s needed to succeed ? Convince sponsors that have been told so many times that digital was fast and are expecting to see things on screens as soon has possible that, in order to make what happens on screens impact the bottom line, foundations are necessary. And pray that the cult of appearance will not prevail over structural transformations.

Let’s even go further. The biggest source of value in digital transformation is not marketing or customer experience but the production line. Ask GE, Siemens and others what they think about it. I even regret that most conferences about digital transformation focus a lot on those who reinvented their customer relationship and experience, less on those who transformed their organization internally (mostly HR) and not at all on those who reinvented their production line and supply chain. Yet, that’s where benefits are the more important and initiatives harder to copy, so the competitive advantage is more perennial. What works best in digital is industry 4.0. More : it actually works and has a tangible ROI.

in 2017, those who successfully transformed their customer experience will care about their production operations. Those who are only starting their journey will wonder if it’s not the best place to start. But there are two prerequisites to do so. The first is that digital is a shared responsibility (don’t expect your CMO or CIO to come with an Industry 4.0 project first). The second is the C-Suite forgets the pursuit of the Wow effect.

B2B Businesses can’t be B2B only but they’re still B2B

Digital transformation is confusing for B2B players, mostly when it focuses on the customer. First because lots of the cases and examples they see do not make a lot of sense for them. Like it or not, the B2B sector has its codes and rules and will keep its specificities. Secondly because B2B businesses are sometimes impressed by the Wow effect of B2C initiatives and expect their own ones to be as funny and shiny. And when they’re proposed initiatives that make sense in their context they are often disappointed.

Two things about B2B companies :

1 – No business can be B2B only anymore.

• because they can’t go without customer data and leave customer understanding to their resellers.

• because they have marketing means to drive the market, create brand preference and bring the end customer to their partners/resellers that the latter don’t have.

• because B2B buyers behave more and more like end customers in their decision makin process.

2 – B2B businesses are still B2B businesses

• with specific codes and approaches

• with clients that focus on the processes sustaining the relationship and execution over time.

Of course the big trends are at work : platforms, direct interactions with the end customer, capturing end customer data to bring more value to both end customers and B2B clients, ultimately trying to do direct business with end customers. It all depends on the kind of business, on the market…

So a B2B company can can choose between different strategies :

• B2B : improve the performance of B2B relationships and processes, bring more value to clients based on a better understanding of the end customer when it’s relevant.

• B2C : influence the end customer, offer him services, work on brand preference

• B2C2B : use the brand preference to bring the end customer to the business partners.

• B2B2C : provide clients with means to grow their business they could not afford individually.

One does not manage the B and the  C in the same fashion and for the same purpose.

In 2017, B2B businesses will built separate but complementary strategies instead of managing B2B and B2C as a whole. It will be more flashy on the C side, sober and value driven on th B one. That does not mean that there’s little to do on the B2B side (there’s actually a lot to do to improve the B2B experience) but digital transformation won’t happen in the same way and with the same value proposition on both sides. And they’d better stop believing that a Wow effect will be enough to build the future of the B2B relationship.

Don’t forget the “industry 4.0” thing that, in many cases, may be more relevant than a relational approach to digital transformation.

Employees and digital : both matters and levers

At the very beginning, employees were the poor relation of digital transformation. In line with my first point about the back-office : what is not visible does not matter, the form matters more than the content. But businesses learned over time that caring about their employees was key to a succesful digital transformation.

One year ago I wrote that 2016 was going to  be the starting point of the employee experience. And I actually saw this matter getting more and more traction. Nearly every business talks about it and that’s a good thing even if more actions would be welcome. If everyone agrees that employees need to be accompanied (but struggle to find how), most of them are overlooking the need for empowerment.

That’s the difference I see between employee accompaniment and employee experience. Accompaniment is a change management action that considers employee as a matter of digital transformation. Employee experience is about the employee work life, about the content of work. It’s not what happens besides operations but about the very content of work. It’s about giving employees the means to get their work done, redefine the content of work, the organization and work tools.

Overdigitized customers vs employees in the stone age

What I see today is that employees are asked to deliver the famous brand new customer experience, to work in a new way, without being provided with the right tools, without any change in the context their work. The disconnect reaches a paroxysm at the bottom of the ladder, on the sales point, with overdigitized customers that had a great online experience, enter the store with high expectations and meet employees equipped like in the stone age.

In 2017, businesses will not only help their employees with nice words, exhortations and trainings but will provide them with the technological, organizational and managerial tools to keep the promise made to the customer. Of course one approach won’t replace the other : both are necessary. Accompanying without equipping is a digital waste. Once again…the form and the content.

Where’s the Digital CF0 ?

Digital Transformation makes two models coexist in the organization. One aiming at securing and optimising current operations, the other at exploring new business territories. No person with common sense can think that a business can switch between two models over night. Nor that it’s the solution. What matters is to find the right mix and adapt if over time.

In both cases, and mostly regarding to exploring new fields, a business must be able to test, learn and accept to to fail. I never saw any successful C-level person saying something else. All say that risk taking is a part of the digital game, that some things will work and some won’t. It’s not about saying that failure should be the new normal but it should become acceptable for both a human and financial standpoint.

What do we see in many organizations ? A CEO aware of the situation that is asked at the same time to run the current business and build the future. This is logical. What is less logical is that he’s asked at the same time to grow the margin, what is more complicated when talking about innovation in an uncertain environment. I know very little businesses able to invest, take risks, while growing their operating margin. All the large businesses that made their move had to accept a more or less long period of stagnation of or limited growth. That’s the very idea of investment.

It requires and adhoc financial strategy and the involvement of the CFO in the transformation strategy. It’s impossible to have on the one side people who say “Transform” and on the other people who say “do whatever you want but I want 10% increase of the EBITDA”. Maybe on strong and fast growing new markets, not on legacy ones.

The double sided strategy required by digital transformation requires an adhoc financial framework.

In 2017, businesses will take this into account from the start to support their initiatives with a secured and clear financial framework. Those who won’t do that will have to content themselves with window-dressing initiatives.

Digital capabilities are not perennial

Businesses know that they need new capabilities to thrive in a digital world. Mainly human and technological. They know that they need such foundations to succeed. But we can also see that the most successful ones did more than investing in digital capabilities.

There’s been a big hype about the Chief Digital Officer and you know how skeptic I am regarding to this position. Besides that a new trend is emerging : CDOs are being replaced by Chief Transformation Officers and it makes more sense.

As a matter of fact, businesses are not even at the end of their digital transformation and they already see the beginning of the next step : cognitive transformation, that’s going to be an even bigger earthquake. And cognitive transformation will be followed by another disruption and so on..

What matters is not to acquire digital capabilities but transformation capabilities. Considering the pace of change, of innovation, what matters is to be globally resilient instead of moving by fits and starts, subject by subject.

In 2017, businesses will start to realize that what matters is not digital but adaptability and resilience. And they’ll organize accordingly.

The C-Suite : from concerned to involved.

Until now, the C-Suite used to be concerned by technology, not involved. Technology used to improve operations but not to change the nature of business. The C-suite used to decide  the main line and others where in charge of making it happen.

Today technology impacts strategy, there’s not a  digital strategy but a strategy for a digital world. The C-Suite can’t focus on the business strategy and delegate its digital version. It must think digital natively, what is far from being the case everywhere.

It’s a matter of acculturation, it requires time and most CxOs did not take it et don’t think they must take time to work on themselves. That’s what makes the difference between leaders and laggards. Most of those who are still wondering where to start have more a coaching problem that a business analysis one. They need to take the time it will take to behave and think digital first.

In 2017 I’d love C-Suites to take some time off, CxOs to work on themselves on a long-term perspective. But I don’t believe it’s going to happen. That’s why the gap keeps growing between leaders and others.

Copy the method, not the result.

Everyone wants to become the Uber or the Amazon of something. However everybody knows how hard it’s been for Amazon to become profitable and that’s the Uber model is still under question. The model is showing its limits, there will be few winners and lots of casualties.

The problem is that, as usual, too many wanted to go too fast and copied the result instead of the method that lead there. They copied the pure players, they copied competitors, they copied good ideas from other industries but they never tried to understand why they did that. Copying the result instead of the method comes with two risks : making irrelevant decisions by not taking the context into account and not understanding the intellectual process that lead to the choice and, so, the possible side effects, what makes it harder to manage change.

In 2017 expect many of the “copiers” experience very hard times. Those who will learn the lesson will, at last, start with the “why” instead of the “what”.

In 2017, more structure and less appearances and show-off

In fact the landscape is pretty clear. On the one side we have leaders that took digital by the right end. We know them and they’ll still be moving forward.

On the other side we have laggards. Sometimes large businesses but also small and medium size ones. Some started shily, others favored speed and appearance over a deep and structural approach.

It’s not too late for laggards to bridge the cap but there not a lot of time left. What will make the difference ? Avoiding a too popular approach that favors the forme over the content and makes people believe that a Wow effect that drives a lot of is enough to say that digital transformation is a success.

Photo Credit Fotolia.