Understanding Digital Transformation

An introduction to the what, why and how of digital transformation covering examples and 5 key challenges to overcome

We’re working in an era where the development of technology exceeds companies' capabilities to manage the challenges created by the technology.

New platforms, apps and tools are emerging daily and as they do, customers, prosumers and keyboard warriors are adopting the technology, talking about businesses and brands, sharing feedback and pinning images of what they’ve bought.

Marketers and brands have lost control forever. On a regular basis we witness well-known companies managing customer conversations very publicly. And it’s not always positive.

Some businesses have made a full transformation to digital. They embraced 'new media' at an early stage, listened to customers and have digital strategies fully integrated within their businesses. Examples include RS Components who realised that they needed to create their own customer community and created Idea Spark, a forum for engineers to provide self-help, recommendations and new product ideas.

This is a great example of a brand adding engaging customer's online by developing a more audience-centric proposition rather than product-centred, although purchases are still encouraged.

RS Components seems to understand its customers more than most and their Ecommerce Behavioural Marketing team, has segmented customers based on their customer journey, rather than product groups.

Dell is another example of a brand that acted early on the journey to transformation. This case study shows how they have been working on optimization in the analytics / customer experience team.

Understanding the challenges of digital transformation

While some companies have been working on optimisation for a long time and will be quite advanced, others may not. It will vary depending on the industry sector and across different marketing activities. I recommend that a good starting point is to audit your digital capabilities - see this tool developed by Dave Chaffey which enables you to review across a 5 point scale. You also need to review the barriers, obstacles and challenges to see what may have limited progress and how this can be overcome.

The challenge for many businesses is that they have long-established systems and processes in place. Many are product rather than customer focused. Some systems are entrenched in the business and changing these systems is challenging. It’s challenging on many levels:

1. Responsibility:

• Digital touches different areas in businesses, so whose responsibility is it?
• It takes time to re-organise, if that’s what’s needed.

2. Skills and understanding:

• Senior people in some cases, are suffering from 'fear of the unknown and 'are in denial about the change, viewing social platforms as a ‘fad’ or unimportant.
•  The skills needed for newer technologies are not in-house.
• Digital strategy is not understood; there a land grab towards social media pages, without considering how they work, who will manage and update the content and respond to customers.

3. Tactics first

• The business is in fire-fighting reactive mode, dealing with issues as they occur, without a real strategy in place.
• Other departments say "we need an app" without considering its rationale, benefit or ongoing management.

4. Agencies

• Where companies use multiple Agencies, there can be conflicting advice.
• The companies’ existing agencies may not have the depth of skills required, but there is no incentive to switch agencies.

5. Customers

• Customers are setting the communications agenda, PR teams are struggling to manage the comms.
• Customers are demanding information and resources, outside the working day, so who wants to deal with that?

Moving from a traditional marketing orientation to a digital marketing orientation, seems overwhelming, so where is the best place to start?

A definition if Digital Transformation

So what is the scope of digital transformation. Let’s look at our definition of digital transformation. In the Smart Insights guide to Managing Digital Transformation, Dave Chaffey and James Carson explain that that digital transformation is:

 “A staged programme of business improvements to People, Process and Tools used for integrated digital marketing to maximize the potential business contribution of digital technology and media.”

But there another issue. Companies have different definitions of digital strategy. Forrester in its State of Digital Business 2014 report, remarks that some regard digital strategy as “adding a new mobile app to their existing business or developing a social media presence” approaches which Forrester categorizes as ‘bolt-on’.

Confusion seems to reign with a lack of definitions inside organizations. One factor is certain, digital will continue to have a greater impact on how businesses operate.

Why is transformation needed now?

So why are we looking at digital transformation now? It’s been needed for some time, but the imperative is the growth of mobile device use which has enabled customers to instantly log in to Facebook, Twitter, Pinterest and other social networks. As they log in, they can openly discuss issues with and about your business. Tablets and smartphones have made it easier to swipe and perform a range of activities:

• Request customer service
• Complain
• Ask for help
• Share good news
• Suggest new product development
• Look for offers

And how are businesses responding? This depends on the organisation’s level of digital adoption and understanding. For example, the long-established UK retailer, Marks & Spencer, launched a new website which wasn’t popular with customers. It used a new system that meant customers had to re-register on the site, but they didn’t discover this until they’d tried to add products to the shopping basket and repeatedly failed. It created significant negative comments online and the website were blamed for its poor sales, yet customers are still complaining, months after the website was launched:

However there are other areas of practice emerging:

It may be that the traditional process within this organisation for developing a new website excludes customers in the process. Brian Solis at Altimeter has been conducting research into ‘Why and How Organizations are Adapting for the Digital Customer Experience’ and he comments that “Digital transformation takes a truly customer-centric perspective that wins over one that’s mainly technology-centric. It starts by simply asking, “what would my digital customer do?” It continues with continually asking and answering the question.”

Marks & Spencer is not alone. Forrester discovered major disconnects between the marketing and technology sides of businesses, with responses signalling a “digital strategy execution crisis”. Their findings were based on a survey of 1,591 senior business leaders in the UK and US that took place during November 2013 to January 2014. This revealed that 74% of executives claim that their company has a digital strategy but the findings indicate “wide disparity” between strategies.

PwC have also been conducting research into Digital Transformation. Their 6th Annual Digital IQ Survey found that:

"nearly every organization lays claim to being a digital enterprise, but as our study revealed, only a minority are truly there."

Their study identifies the five key behaviours that give companies the edge, enabling them to maximize their use of digital technology across the business and position them for better performance. They call this Digital IQ.

The first step towards transformation

If this resonates with you and perhaps you’re the lone digital voice in your organisation, trying to persuade other to take action, how do you get started?

The Smart Insights guide to Digital Transformation starts with making the business case for transformation. It’s getting buy-in at a senior level, before you take other action. How do you do this?

If you’re a smaller or mid-size business:

• Take a look at your competitors. What are they doing? If their sales are increasing and if your sales are not, this is a good starting point.
• Take a look at your customers. What’s their demographic profile? If they are an older audience, what’s the succession plan? How are you winning new customers?
• Take a look at your staff. Where are they spending time managing customer queries, what are the issues they can’t solve? These may be missed sales opportunities.

If you’re in a corporate or larger business:

• Find other digital advocates. You need a team to get buy-in within larger organisations.
• When you’ve found the advocates, form a working party and undertake a pilot into a digital project. Ideally in one department or area. So when other departments say “it won’t work here” you can provide them with evidence from your own organization.
• This may take longer, but it takes time to make significant changes in larger organizations. Unless you can identify a digital champion who is willing to embrace digital.

So, I've mainly focused on the 'what' and 'why' in this article. In my next posts I'll take a look at approaches and more examples of managing Digital Transformation that I have seen to be effective.