One of my ultimate goals with this series of articles is to write about digital transformation (DT) from the perspective of its implementation with language understandable both to business people and project team members. In other words, if we talk in terms of costs and benefits, I want to outline not only the benefits of DT done right or the cost of it not done at all, but also the costs of DT done wrong.
I have had a chance to speak about this in conferences and public events and one of the very first questions that comes from the audience is the one about the scarily low success rate of digital transformations. Indeed, the statistics here do not speak in the favour of embarking on the digital transformation process. According to the Forbes article, close to 70% of all digital transformations fail. What can we do to not become a part of this sad statistics? In this blog post I would like to highlight two important things that you can do even before you begin the actual process of DT to ensure that you do not end up among the 70% of failed cases, and those are:
- Understand that one DT project does not equate to the DT process, or single delivery does not equal change;
- Make sure that you do not forget about the value from customers’ perspective when defining the success metrics of your DT process. We will use the terms of customers as paying clients, interchangeably with users, internal or external to company implementing DT. Even with extensive market research we can hardly know upfront what the real user need. Instead, we should rather establish a testable hypothesis about the value our users will consume.
So, let us begin. Successful digital transformation does not happens from the bottom up but from the top down. Effectively, this means that there needs to be a significant all-encompassing and strong vision coming from leaders and managers in order for the process to work. Bringing the leaders and doers together and marrying vision to operations apparently helps in delivering the results of digital transformation: Improving the speed of processes (internal and external), raising the quality of your product or service. If DT is the process with the ultimate goal to bring the company to a new evolutionary stage then which first step should unlocks this journey? Well, even if there is no “one-size-fits-all” approach appropriate for every single company we could say that every single initiative should start with an effective team empowered to make and implement high quality decisions in the most efficient way. In our case we could simply say that the board of CEOs would approve a portfolio of DT projects proposed by DT team which decision should lead to proper results in form of required project outcomes delivered by the project teams. Easy to say, right? But what is the result supposed to be?
Traditionally project results are compared against ROI as the main performance measurer. Or, even more traditionally, a project is successful if it is finished within the time, scope and budget. Those are still valid metrics for project success but there is subtle, yet an extremely important perspective, that should be included in our belief system and become a part of the company culture. It is important to accept that improved customer value is the key driver that will lead to ROI. Of course, we have to make profit to continue delivering customer value but focusing on short term ROI of single project may actually distort DT under certain circumstances. During the implementation of complex projects, a company invests its resources to find the best way to serve its internal or external users. More often than not, one and only one hypothesis is made and that one concern is defining project deliverables which users will value the most. And it is this hypothesis that is being tested through agile project delivery. During the implementation of DT project, we need to learn about value delivered to end users and measure our progress towards delivering that value. For a DT process to truly hit all the targets and be sustainable, testing, learning and adapting is a loop that needs to be repeated over and over again and at multiple levels.
To make this as practical as possible, let’s look into the example of a hypothetical telecom company that wanted to find the best way to create value for its end users, what was learnt along the why and how the company pivoted its direction.
Our telecom company is of the average size in this industry, it has been on the market for more than 50 years, and represents one of the incumbent companies on the market. The main challenges for this company are twofold. The external one is to keep leading position on the liberated market saturated with many new telecom players serving the users with more personalised and innovative service offers. The second one is related to inherited deep hierarchy and so called “silos” in organisational structure that needed to be transformed towards the one with greater business agility in order to keep the pace with fast changes on the market. To cope with those challenges company started its DT program few years ago aiming to transform itself internally into data-driven agile customer service provider and at the same time to develop and deploy new digital services for their customers.
A new organisational unit in charge for DT has been formed and digital strategy with accompanying DT project portfolio has been adopted and approved. Projects within the DT project portfolio have been prioritised for implementation. Quality of service provision is the one of the key aspects of overall customer end-to-end journey experience which is, due to the nature of the business, a very important parameter for any telecom service provider. To improve customer satisfaction by enabling higher quality of service provision telecom company started and implemented a project that enabled customer interaction across digital communication channels with a range of tools provided to easily customize products and services to use.
The key reason the telecom started this project was to improve communication with its customer base and to minimize user churn. Surprisingly, higher quality of customer experience has been achieved but buyers still preferred personal contact and physical customer centres instead. An analysis was carried out to understand this customer behaviour and the DT team decided to pivot and revise customer centres opening hours and optimal physical location. Why? Because there is no company today that could afford the luxury of losing contact with their customer base. That’s why, in spite the “failure”, based on new discovery team started a fresh project from DT portfolio with a big data platform in place to support data analytics enriched with people density and movement data collected from telecommunication mobile networks. These data were then used as input for the decision-making system which as output sends information so that centres working hours and locations are optimized accordingly. The Telecom company even went a step further and offered a “decision making information” package as a service for any company wanting to make an informed decisions in determining optimal location for their customer shops. What the company did in this way was to optimize locations and centres working hours and effectively improve communication with their customer base. They even monetized their data by selling them on a market in form of atomic packetized service and project was an obvious success because increased ROI was evident.
In the case of a complex environment no one could be absolutely sure what the real value for the end user is. Instead of trying to define perfect value proposal we should have an agile development process and team in place that are able to implement delivery and test value hypothesis in the most effective and efficient way possible. Staying aware of the actual customer needs and understanding how to use the knowledge of their behaviour to pivot instead of giving up might lead to creating a true value. The hypothesis in our example was that high-quality service provision and online omni presence of customer support will be enough to migrate customers from physical world to digital channels. The hypothesis was proven not to be true and the DT team pivoted to another project from DT portfolio. What if they didn’t? They would probably become a part of that sad statistics from the beginning of this post.
Once you decide to embark on the DT journey, you will find out that there are many key stakeholders whose expectations you will have to manage. One key message here: stay open minded about the direction in which this journey might take you. And set the stage by making sure the basics are in the right place before any digital transformation project starts. How to set the stage for DT projects to succeed? In our next blog we will present setting a proper DT structure. Stay tuned.