Digital Transformation or Transfusion ?

At an IT conference dedicated to Digital Transformation a little over a year ago, I listened to the CIO of a major retailer vaunt the advances his company had made with digital transformation using state-of-art technologies and products from innovative technology vendors. Impressive, I thought. A few weeks later, my wife bought an item on that retailer’s website which arrived missing a part. On a Sunday afternoon, we stopped by the retailer’s store nearby to exchange the item. After explaining the problem to the customer service person and requesting an exchange, she stunned us when, without saying a word, she handed us a refund slip. As we tried to explain again that we wanted an exchange and not a refund, her supervisor intervened and explained that a) they do not stock the item in the store; b) their online system does not link to their in-store system; and, c) the in-store system does not allow an exchange for an online purchase, so she can only issue a refund. The two employees behind the customer service desk remained indifferent as my wife murmured she could buy the product on Amazon since it was available and a tad cheaper.

A few weeks ago, a similar experience with another large retailer, also claiming digital prowess: their online system shows an item out of stock at all locations in my area, and it won’t be back in stock for another week. Can I place the order anyway to be fulfilled when the retailer has the item back on the shelf? “No, sorry. Our system does not allow that. Please check again on the 29th when we expect the item back in stock” explained a very polite customer service agent. You guessed it — I found the item on Amazon, and for less.

These are but two examples of what I have encountered frequently since “digital transformation” became the buzz phrase du jour, and that makes me wonder about the kind of digital transformation these companies are touting, and perhaps explain why a company like Amazon has been encroaching on traditional retail for so long while everyone plays catch-up.

Definitions of Digital Transformation abound, but one fundamental aspect that is generally agreed upon is that it is about building digital front lines (customer-facing, loyalty) and modernizing the business backbones (efficiency, quality, supply chain). Consider the few glaring breakdowns that the stories above illustrate from a customer’s perspective:

• Failure to deliver a more agile, efficient experience to the customer
• Ineptness in a technologically driven market
• Poor enablement of their employees with digital technology
• Poor or no digital integration as a centerpiece of their operations (online and brick-and-mortar)
• A weak motivation to deliver a better experience across all aspects of their operations–employees, customers, and suppliers.

These companies, and others like them, may have implemented Artificial Intelligence engines, invested heavily in sophisticated analytics tools, and use Machine-Learning, Cloud, Mobile, IoT, and other tech credentials often cited as evidence of earnest digital transformation. Yet, none of those prevents customer defection–and a sour experience-when implemented with the wrong focus or priority.

A digital transfusion of the hottest technologies does not a transformation make; certainly not when organs of the business are dysfunctional, outdated, or unreceptive to the brew.

Digital transformation journeys have a failure rate akin to most technology projects. The reasons vary, but the essential elements I talked about in a past post are very much present. In fact, because digital transformation is not a product or a one-time event, but reflects a mindset and business execution that embraces constant change and agile integration of technology, it is more prone to failure in the short and long terms.

Happily, there are digital transformation success stories and companies that achieved remarkable results from their digital transformation efforts. Those organizations have a few things in common:

1. Their digital strategy is driven from the top, adopted across the board, and anchored to specific goals and result.
   
   
2. They focus on improving the customer experience, engaging, and making it easier for the customer to do business with them.
   
   
3. They prioritize increasing revenue (by growing their business) over cutting cost (by downgrading quality and service) (the airlines are a notable exception!).
   
   
4. They do not seek to reinvent themselves as digital natives by haphazardly acquiring technology, but extend their traditional offering and value through carefully deployed new digital capabilities.

Digital for the Rest of Us

Realistically, not every organization has the aptitude and traits to pull off successful transformation projects. The attentive ones, however, know that they need to act before they become digital refugees in their own markets.

Worthy volumes have been written about digital strategies, the dos and don’ts of digital transformation, and prescriptions for reincarnating as a digitally enabled organization. The material is enlightening, but it can make the task look daunting to most organizations. So, they react in one of two ways: 1) they get stuck in inertia, fearful of failure and the unknown, while the digital storm passes them by; or 2) they take the plunge, in a panic, buying a Hodge-Podge of technical gear, hoping to join the digital club–too often with disastrous results.

So, what is the average organization to do?

The answer depends on each organization’s make-up, priorities, digital stance, and intention (many airlines, for instance, made impressive strides with digital, but the traveling public has not seen that translate into better service or product). One thing I know is that digital transformation does not have to be one-size-fits-all or done on a scale that only Fortune 100 companies can afford. Nor does it have to be expensive and complicated.

A few points to consider:

• For much of my career, business strategy and needs drove IT plans. Many of us CIOs perfected the art of pinning every IT expense to a business initiative. Today’s digital market upends that line of thinking and requires smart organizations to build their strategies around what IT capabilities make possible. Making this cognitive transition is the first step on the road to digital bliss.
  
  
• Starting a digital transformation with big, expensive legacy replacement systems and activities is a perilous approach. It will consume too much money and people resources, exhaust the organization, and distract from delivering the transformation benefits. A wiser approach would be to map out the business and, wearing the customers’ and employees’ shoes
  simultaneously, identify possible improvements across the customer experience from the perspective of each group, and determine what can and needs to be digital.
  
  
• When the desired experience is defined, specific options and technologies that lead to the desired outcome can be identified. (For example, IT professionals know exactly how to integrate a supplier system to an in-store one, as they did for decades with more complex and cruder technology. That was not thought of as digital transformation, but simply as a routine business project).
  
  
• Use an iterative approach. Consider sprints of smaller, well-defined, technology-enabled projects. Those can quickly deliver measurable value to customers and provide quick feedback to inform the next value-adding step or project while reducing risks.
  
  
• Lastly, there is no shame in being a smart follower. Study other companies’ digital journeys and learn from their mistakes and experience.

Author: Bassam Fawaz