4 Digital Transformation Challenges
New problems are rarely fixed by applying old thinking. In the last decade a “perfect storm” of change has evolved that requires new thinking – thinking that takes advantage of the digital environment and transforms business as we know it.
Three central factors are at play. First, economic. We have lived through the biggest economic crisis of modern times and it has forced business to fundamentally reevaluate the value they provide to their customers and how this links to shareholder value creation. Second, social. We have a rapidly expanding population that is putting a premium on unique experiences relative to mass produced goods. Third, technological. Technologies are evolving and maturing more rapidly across all industries than at any other time in history.
To respond to these external pressures, meet their customer expectations and reduce costs many organisations are about to, or have started to, embark on journey of digital transformation. Many of the clients we work with, from government organisations to private companies, are realising the potential gains digital transformation can bring to their organisation — and the potential threats if they do nothing.
Working with companies and business leaders who are focused on digital transformation we have identified four key challenges the need to be addressed to drive business transformation through digital means. I outline them below.
1 – Understanding the Customer
Companies like Amazon, Uber, Airbnb and Google have changed the expectations of the market forever. The average consumer now expects brands to be able to understand their unique wants and needs and create a tailored experience to suit. Most business leaders understand this principle but often find themselves caught in a discussion about technology.
Customer focused digital transformation essentially involves understanding customers and where their expectations are heading — rather than a conversation about technology. If a business doesn’t bring this lens to a digital transformation programme and develop a strong internal narrative about the customer, then projects will inevitably become internally focused.
The most vital element in ensuring the success of a digital transformation project involves your company developing empathy with your customers by using research, journey mapping and data analysis.
2 – The Always-On Business
Becoming a digitally driven business has many advantages but it also creates new set of challenges. Leaders will need to think about new, potentially unconventional team structures, and acquiring resources with skill sets that have not yet been completely defined. However one of the greatest challenges can be the reality of becoming an “always-on” business.
In many ways this ties in closely with altered customer expectations. As an organisation or brand becomes increasingly digital its customers will expect to be able to interact with that brand in any way they want. At any time they want. Many digital transformation projects have gone off track as the reality of delivering a service 24/7 becomes apparent.
It is critical that business leaders facilitate early on the discussion about what meeting customer’s service expectations really means — ideally before project teams form and work begins.
3 – Business Model Velocity
Simply implementing technologies is not a digital strategy. Some organisations get confused about technology implementation and fail to define a clear and simple focus for digital transformation. Today’s environment is seeing business models evolve at an incredible pace. Businesses that are leveraging technology to address unmet customer needs are redesigning whole markets and disrupting the status quo.
It is critical that a company embarking on a journey of digital transformation keeps the business model conversation very seperate from the technology one. The two may be interlinked but the model needs to be anchored in a discussion about business strategy and competitive advantage. Technology is an enabler but it cannot transform the way you do business, or the way you connect with your customers.
Businesses that recognise where the market is heading, understand the opportunities that it presents, and move quickly stand to profit most from digital transformation.
4 – The Data Dialogue
Almost every company is now awash with data. When used properly it has the power to provide insights and actions that can transform businesses. The biggest issue is no longer about getting access to data, but knowing where to focus.
The best businesses develop a conversation about data that is focused on delivering a service to customers. Yes, it is possible to analyse all the data available and use it to create better segmentation and targeting. But that can be a costly and difficult place to start. The best approach is to ask “how do we find and use the few data points that will provide value to our customers?”.
Digital Transformation is, by definition, the use of digital tools and techniques to transform business. That requires new thinking and working in new ways. The biggest digital transformation challenges, therefore, are not about technology at all. They are leadership and communications challenges.