Major Roadblocks to Digital Transformation: Part 1
3 minutes read
In the coming years, digital transformation is undeniably going to drive everything that matters in business. Disruptive technologies are drastically changing the fundamentals of how companies reengineer their processes and rethink their offerings. Digital has quickly risen to become a priority for companies, and the message to executives is loud and clear: Transform or Fail. However, when a business embarks on its path to digital transformation, they might come across a unique set of challenges and potential risks causing them to stall. Below, we outline key inhibitors to digital transformation to help you better prepare for your journey and avoid roadblocks.
Incomprehensive Digital Strategy
Companies that start with their digital transformation by simply researching and acquiring digital technologies are bound to fail. Even starting with an exhaustive analysis of current business problems might not work. Ideally, you should make your first move by envisaging the impact that digital technologies are going to have on your industry over the next 5-10 years. Avoid capitalizing on the state of current technology for short-term advantage. Considering the effect on your people, processes and technology while crafting the long-term vision for your business will enable you to reverse-engineer the future and identify the feasible steps and priorities for today.
Although nearly 8 out of 10 business leaders realize that not having a digital strategy would eventually have a detrimental effect on the success of their digital transformation, more than 70% of the digital transformation projects are currently executed as standalone initiatives without being tied to a larger strategic roadmap-Marketing technologist study (SapientNitro, MarTech)
Visual: Approaches of Digital Transformation Implementation –Digital transformation and strategy: Getting it right (Amdocs research)
Organizations develop digital transformation plans in silos and, consequently, fail to identify all internal and external dependencies. In the end, there is no digital strategy to tie everything together.
To combat this digital transformation challenge, it is critical for business leaders to understand that there is no inherent value in “going digital” without a strategy. Also, you will not get any mileage in designing a standalone digital strategy that is not positioned as an integrated part of the business strategy. While it is imperative to stimulate local ownership of ideas and projects to forge them as game-changers, it requires clear and hard direction from the center as to which projects to expand and in which order. Businesses must take a strategic approach while making digital investments and must layout the incumbent approaches, practices and governance mechanisms. Enterprise strategy, culture, people and processes must be fully aligned to realize the true potential of digital transformation.
Poor Context of Customer Behavior
It should come as no surprise that understanding and contextualizing the behaviors of connected customers can be a formidable roadblock to digital transformation. It’s viewed as one of the most common challenges faced by businesses engaged in digital transformation initiatives. More than 7 out of 10 businesses see it as such, and that figure is up 30% from the year before. Linear and single-channel interactions between customer and business have evolved into a multi-channel and omni-channel customer engagement model that requires much more thorough analysis to understand and even more so to monetize.
Visual: Initiatives to better understand customer behaviors
Yet, as of 2016, only 52% of companies had instituted a customer research program to better understand digital customer behaviors. Perhaps more concerning, only about 54% of companies have even begun to map out their customer journey, and only about 20% of digital transformation leaders say they are analyzing the mobile customer journey-The 2016 State of Digital Transformation (Altimeter). Businesses that don’t contextualize improvements will be largely unable to realize the full return on transformation-related investments.
As customer experience is a top driver of digital transformation, organizations should map their processes to the customer journey. Today’s connected customers differ in fundamental ways from customers of the past. Therefore, businesses must invest in smart applications combined with artificial intelligence, including deep learning, machine learning, predictive and prescriptive analytics. For improved understanding of customer behaviors, it is also advisable to include marketing automation technologies that integrate with both sales and customer service functions. It is critical to completely map out the customer journey and gather information on their unique attitudes, behaviors, and experiences or else, it will be impossible to implement truly customer-centric changes that improve the overall customer experience.
Lack of ROI model
As companies move up the digital maturity ladder, funding and resourcing needs intensify, prompting decision makers to request ROI models. Nearly 70% of digital transformation leaders are challenged with justifying the value of digitalization, mostly due to lack of required data-The 2016 State of Digital Transformation (Altimeter) Just the year prior, the same statistic stood at 34%, which reflects the increasing pressure digital transformation teams find themselves under. A deeper look at the maturity of ongoing customer experience measurement programs sheds light into what could be the main root cause of the ROI shortfall.
Visual: Customer Experience Metrics Competencies and Maturity Levels –State of CX Metrics, 2015 (Temkin Group)
Less than half of organizations have deployed what we consider to be the cornerstone of successful digital transformations; continuous, consistent, impactful and integrated customer experience measurement programs. Unfortunately, for the two measurement competencies that tend to matter most when it comes to projecting digitalization ROI, impactfulness (tracking metrics that are meaningful enough to drive decisions) and integration (integrating these metrics into the decision-making process), adoption drops drastically to less than 20%. In an era where Big Data is proclaimed the protagonist of business performance improvement, companies still struggle to define, track and take action upon foundational quantitative insights, slowing down the pace of digitalization.
To cater to this digital transformation challenge, businesses must fully align their investments to their overall digital strategy. It is recommended to take an enterprise-wide view while planning and prioritizing processes. A digital ROI framework’s success rests on the ability to balance and project returns on digital investments across the strategic focus areas including customers, employees, operations, technology and innovation. Each of these areas should be associated with related Key Performance Indicators (KPIs) so that a company can accurately track and measure the impact of its digital initiatives. Measurement should not be only quantitative in nature but qualitative as well. The metrics must align to the overall business vision and must be made a part of every employee’s individual performance objectives in order to drive required change.
Digital business transformation can be a long process and will involve many challenges. But it offers unprecedented advantages as well. The wins rejoiced in will be significant. In my next blog post, I will expand on the second set of roadblocks that are equally important. Till then, stay tuned and do not over worry. No enterprise takes on all these challenges alone. We are in it together!