The Loss of Innocence: 2 Decades of Enterprise Digital Transformation

If you ask every executive in America about their top priorities this year, chances are the wide majority of them would say: digital transformation. No different than in 2016 when half of all business leaders thought the same.

But here’s the bottomline. Digital transformation has become a buzzword – like “mobile first”, or “user experience” or “the customer is always right.” And like all buzz words, whereas many executives use the term, very few companies actually execute on it.

You don’t believe us? Check out this powerful chart to see where they are today versus one decade ago. It shows very powerfully how companies suffer in the long run when they do not have a strong digital transformation strategy and execution.

Source: Visual Capitalist

Retail is a notoriously difficult field to be playing in. However, despite increased competition, we still see a lot of surprising winners. Jet.com, Alibaba, Bobobos, Touch of Modern are all digital-only companies that rose from “zero to hero” in the last decade at the expense of traditional retailers. All digital. All powerful.

What if I told you that despite their unique value proposition, industry, target audience and marketing approach, all successful enterprises undergo pretty much the same end to end digital transformation? Or if we are talking about recently launched companies that made it big, these companies also followed the same modus operandi to build, launch and manage their digital business to stay relevant in this day and age?

Enterprise digital transformation is much more than a simple buzz word. There is a “method to the madness,” despite endless variations across the companies that make it to the top. In this article, we want to quickly, and methodically, take you through the key pillars of digital transformation. We cover the mindset you should be in, the process you should follow the KPIs and the metrics you should be measuring. And how you can avoid stalling on your digital transformation.

Let’s get right at it.

Step 1: Assume you are always behind

Chances are, if you work at a large company, you are already behind. Think of your company and compare it to your competitors (or any company you may be personally doing business with – think Amazon). If you do that, I am confident you can think of at least a few ways your company could optimize its digital strategy.

The reality is quite simple. Most companies are behind when it comes to their enterprise digital transformation efforts. Some get so behind – they can never recover. 52% of Fortune 500 companies who were strong and mighty in the year 2000 have closed shop and been replaced by companies that adopted comprehensive digital strategies.

The reason why you should always assume you are behind is quite simple. Digital Transformation is NOT a one time deal. It is a continuum. It’s not a sprint, it’s a marathon. It’s not a set of finite checkboxes.

By the time you think you’ve caught up with your competition, a new set of priorities, market conditions and business priorities will force you to rethink, pivot and read just your digital transformation.

The key is to have a strong digital strategy foundation then constantly improve on it. That’s why companies that build their enterprise digital transformation efforts on solid ground end up being significantly more successful over time. Example: early adopters of digital transformation are achieving 9% higher revenue creation, 26% greater impact on profitability, and 12% more market valuation.

And digital transformation doesn’t only relate to customer-facing technologies and digital products (websites/ mobile apps). It is a holistic approach. For example, companies that leverage emerging technologies to optimize internal operations see lower procurement costs of up to 20%, supply chain costs reduction of up to 50% and increase in revenue of up to 10%.

You still don’t think you should assume you are behind? A recent survey from SAP identified the following pillars of enterprise digital transformation over the next decade. Ask yourself – which ones are currently being discussed/ worked on/ implemented at your company.

• Massive global Connectivity across all devices
• Massive computing power and storage
• Unlimited cloud computing
• Connected things

These are the topics that are top of mind for executives at Amazon, Google, Facebook and Apple. And at million other companies which have already implemented a robust foundation for their digital transformation. A foundation on which they can now afford to look forward towards the future – to be proactive versus reactive. It is against this future that your company’s success or failure will also be measured against. And that is why it is important to always assume you are behind.

Step 2: Analyze your current tech stack, performance and areas of opportunities

This may be the future, but we’re not there yet. Is that what is going through your head right now? If it is, you’re not alone.

There are probably millions of companies out there which have yet to catch up with the foundational standards of a digital strategy, let alone take it to the next level. If you’re an executive at one of these companies, fear not.

There is a step-by-step strategy to helping you assess your current situation and to devise a plan of attack to right the ship. And even if you work at a successful company, the same methodology applies to staying ahead of the competition.

This framework is exactly what separates the top 10% most successful companies from the rest! So whether you’re just thinking about jump-starting your enterprise digital transformation strategy or you’re well on your way with it, you should be asking yourself the same questions.

Step 3: Define clear goals

Successful digital transformation starts with a solid, well-thought-out strategy that clearly identifies your business objectives. Think of it from the perspective of your company, independent of channel first (mobile/ web/ offline/ sales/ call center etc.) Your company is trying to accomplish ________ (fill in the blanks!). Whether it’s cost cutting or media optimization or product design or customer service, have a strategy that identifies a 21st-century problem and proposes a 21st-century solution.

For example:

1. Is your goal greater efficiency in the work process?
2. Is your goal to grow your business?
3. What business process are you trying to change? Customer service/customer experience? IT? The speed with which uses navigate your website?

These questions are important, because they will not only determine your digital strategy, they will also make it easier for you to determine what type of return you are getting on your investment

Without asking these questions, businesses often fall into what Everest Research IT services VP Chirajeet Sengupta calls the ‘digital trough.’

This usually occurs after you have implemented a new digital technology, and there doesn’t seem to be a measurable ROI.

But this ‘trough’ isn’t really about the enterprise digital transformation strategies you’ve implemented.

It’s really about the lack of vision that preceded the implementation. In other words, you haven’t answered the main question: WHY are we doing this?

Or to put it another way, you haven’t defined what success will look like for your digital transformation. Not having a vision is similar to closing your eyes and just walking around hoping to find where you are trying to go.

If you haven’t identified areas of weaknesses in your business, or areas that need improvement, hire an expert to determine how your company stacks up in key performance areas relative to your competitor’s.

Step 4: Build cross-functional teams

In order for your digital transformation to work, you must build cross functional teams.

That means that your IT department must communicate with all your other teams, including marketing and sales to create and get alignment behind your end to end vision and execution strategy.

The biggest mistake you can make is to think of digital transformation as a piecemeal shift that only affects one sector of your business.

The truth is, most people are resistant to change, and this is especially true if they perceive that change will only take place in one division of your company.

Cross functional discussions within your company pave the way toward change. When every member of your team understands what changes you are making and how those changes will impact their work processes and the bottom line, they are more likely to buy in to your vision.

Step 5: Collect data

The popular saying is that “content is king,” but we would argue that “customer data is king,” because without it, you don’t have the information necessary to understand what your customers want and need.

Your biggest asset toward enterprise digital transformation is utilizing your customer data.

What kind of data do you need to obtain? Here are three examples:

• Basic Personal Data – this includes the name, date of birth, gender, address, telephone number, email contact, social network contact, account information, and job title of your customers.

• Measurable Data – this includes information about the types of products and services your customers have purchased, a list of the most returned products, email click through data, website visits, online registrations, social media mentions, and complaints.

• Customer Journey Data – this includes information related to customer satisfaction, customer retention, repeat buying, and reasons that customers purchased your product or service.

After obtaining this information, you are much better equipped to understand the areas where a enterprise digital transformation will improve customer satisfaction, as well as the areas in the customer experience that can be enhanced through a digital transformation.

For example, years ago, Zappos aggregated their customer data and learned one key thing: customers were frustrated that returns processed online were taking too long.

Zappos used that information to change how customers ordered their shoes. Instead of having to wait for a returned item to reach the Zappos’ warehouse, the substitute item was sent the moment a customer placed the return order.

Take a guess how customers responded? Sales increased exponentially; their NPS score went up, overall satisfaction with Zappos as a company went through the roof paving the path to making it into one of the top most successful digital retailers in their industry.

This is a prime example of why every company should use customer data to help gain customer insights before defining an end to end digital strategy. In addition, make sure this data is available to teams that need it, including marketing, product management teams, sales, and operations.

Step 6: Test your technologies

We’ve already discussed how change takes time to accomplish. And the bigger the company, the more time this process will take.

The one thing you can do to reduce that time and to lower the risk of massive failure is to test every new digital technology.

But you’re not testing just to see if the technology works properly, you are also determining whether it has improved or streamlined a process you identified as in need of an upgrade. In other words, you set specific KPIs for every improvement to your digital strategy and then you measure the effect of your initiatives against those KPIs.

And you don’t have to start at the beginning as it were. You can start with a small experiment to test the waters. For example, you can select a group of customers to test a pilot version of your technology and provide you with feedback. That way you learn early on what works, what doesn’t and what needs to have some small changes implemented before releasing it to all your users.

The digital world is fast-moving and if you don’t test and iterate quickly, you can bet your competitors will take advantage of your lack of progress. And get ahead of you! Train your resources to always seek customer feedback so that you can test and iterate until you’ve perfected your processes and the underlying technology supporting your business.

And remember, that this idea of testing, iterating and testing is part of an entire culture of continuous change you should implement for your business.

Step 7: Assess KPIs

The challenge with assessing KPIs for enterprise digital transformation is that many of the metrics used to determine success are not financial.

With traditional business processes, KPIs tend to be much more cut and dried, and ROI is clear and understandable. But digital transformation is non-traditional, and that makes ROI more difficult to determine.

For example, if part of your digital transformation involved a massive social media campaign, how do you quantify the increased brand awareness and social media activity for you business in dollars and cents?

This can be frustrating and confusing, especially if you sold your teams on the idea that digital transformation would impact the bottom line.

But here’s where you have to learn to think differently.

Enterprise digital transformation may not yield traditional ROI based on traditional KPIs, but there are still some ways you can determine what’s working, including:

Basic framework for testing the return on investment for your digital transformation

Customer Engagement/Experience

1. Has technology increased the number of customers who are communicating with your company?
2. Are you receiving more email inquires and chat sessions since you implemented your new technology?
3. Are your customers happier with your products and services after you’ve implemented your digital strategy (NPS score, surveys, email inquiries etc)?

Improved Knowledge Sharing process

1. Has information-sharing between teams in your company improved?
2. Has the creation of platforms to improve collaboration paid off in terms of greater cohesion between all business processes and functions?
3. Are your own employees happier with the new processes put in place?

Operational Costs

1. Have you reduced operating costs since the transformation?
2. Has employee productivity increased?
3. Has your company reduced downtime caused by security breaches or system failures?

Step 8: Keep going!

One thing that never changes in the digital landscape is that you and your business need to constantly change and adapt in order to stay relevant and ahead of your competition. It’s like the old saying: “Everything changes but change itself. Everything flows and nothing stays the same.”

Enterprise digital transformation never stops. It’s a continuous process.

We know this is obvious to you. But it’s easy to get stalled in the midst of a digital transformation. This often happens because employees and executives alike often get hung up on looking at releases and milestones as checkboxes. And of course, you want to measure progress towards the end goal. But you also need to understand that the end goal is always in flux. It’s not a done deal. After you achieve a milestone, you need to define and execute against other milestones.

Case study: Lego – the company that never stopped innovating

There are dozens of success stories related to enterprise digital transformation.

For example, after dominating its market for years, LEGO fell into the valley from 1992 to 2004, and was near its final days as a company.

But the company implemented a bold and smart digital transformation that created alliances with movie studios, mobile games and mobile apps.

LEGO rebounded in a huge way, and the company’s two movie releases aimed at a wide audience have grossed nearly $800 million throughout the world.

What LEGO realized is that modern kids didn’t just want to build stuff with legos; they wanted an experience.

So LEGO delivered that experience on multiple digital platforms, transforming what had once been a company viewed as old and worn-out, into a powerhouse that has infiltrated every aspect of pop culture.

But think about this for a moment.

It’s likely that some of the old guard at LEGO were very resistant to enterprise digital transformation. These people could not conceive of LEGO being anything other than a traditional toy company.

But the world has changed, and the visionaries who saved LEGO understood what their consumers wanted, and how the toy culture had broadened from something kids did at home, to a shared experience.

They cashed in on that culture change, and in the process, not only saved one of the country’s most known companies, they transformed it into a brand that is hip, cool and relevant.

Companies that stopped innovating: Blockbuster

Had the people in charge of LEGO opted to maintain the status quo, the company would have joined the list of businesses that failed to adapt to the digital revolution.

Remember Blockbuster?

Before Netflix, Blockbuster was a brick-and-mortar DVD-rental company with franchises throughout the country.

It was a household name, but it failed to adapt to the early movie streaming revolution that was just beginning at the time.

In fact, Blockbuster was given the opportunity to buy Netflix, when Netflix was just a startup that was offering DVDs in the mail to customers.

Netflix wanted to diversify and create a streaming service, but the people running Blockbuster didn’t see any future in movies and TV showed delivered via streaming, and declined to purchase Netflix. They turned down the option of buying Netflix for 50 million dollars (literally pocket change for a company that had IPOed a year before) in what Tech Crunch accurately called: “Snoozing and Losing: A Blocbuster failure.”

Blockbuster’s own CEO remained unrelentless. In 2008 he boldly stated: “Neither RedBox nor Netflix are even on the radar screen in terms of competition. It’s more Wal-Mart and Apple.”

Blockbuster went out of business two years later in 2010. While Netflix turned into a company worth 70 billion dollars.

Blockbuster failed to innovate and transform based on the prevailing trends. This lead to their peril. Avoid falling into the same trap.

Summary: The future is now… and tomorrow

With digital technology evolving at such a rapid pace, the ‘future’ that people always talk about is now…and tomorrow.

In fact, the future isn’t measured in time, but rather in progress, because enterprise digital transformation is an ongoing process that never truly ends.

Regardless of the success you achieve, you can never take on the attitude that you’re done.

When you look at Amazon and Apple, the reason these titans remain at the top is that they never stop looking for new ways to change the game.

Remember, Amazon started out as a book seller…and now it has not only penetrated every retail niche, it’s also became a major player in the TV streaming market, producing high-quality, cable-level shows. Oh and now they purchased Whole Foods to compete with the likes of Wallmart and Target.

Constantly changing. Constantly adapting. Amazon sees that as the only way to remain relevant. So should you!

Transformation isn’t for the future…it’s happening now and it must also happen tomorrow, so don’t be afraid to embrace change.

After all, it’s the only constant you can rely on in the digital world.