The Problem with Digital Transformation

Digital transformation holds the promise of revolutionising business, revolutionising society and revolutionising the way we live. Yet, how many companies make the correct investments in digital to capitalise on the opportunity and positively transform their customer's experience?

The bigger question is whether the companies that are investing in this are actually delivering the commercial returns, seeing improvements in customer satisfaction and overall customer engagement?

A recent Forbes article provides a harsh reality check with 7 out of 8 projects resulting in failure.

Figure 1 - The odds of a digital transformation project achieving success are currently little better than roulette 

Technology dominant thinking is often not customer centric

This does not mean that people don't value new technology but it might suggest that people value their experience with technology more highly. This is likely a sign of times we are living in - An Experience Economy

It could well be that technology for technology's sake represents a red herring especially when we consider the recent Forbes article by Bruce Rogers 'Why 84% of companies fail at digital transformation'. The reality is either the holy grail of digital transformation is not working effectively or it is not being conducted well enough to deliver the anticipated or promised returns.

Whilst on the surface it appears that a great many transformation projects are likely missing something fundamental. The 16% success rate over the 84% failure rate makes for sobering reading for anyone involved. The probability is that most will fail! The question is why are so many transformation projects doomed to fail? What are the factors they are lacking that will help to drive the needle upwards toward more successful implementations?

So what must a company do to be part of the 16% that successfully digitally transform?

The levels of investment required to undertake a digital transformation program can be substantial. Whilst digital often can seem easy to do the reality is very different. Digital is difficult to do well because it represents a more complicated form of design requiring a multi-disciplinary approach. Great digital design requires great teamwork and collaboration skills.

At the heart of digital disruption is the power to connect multiple systems which in turn can form ecosystems. Understanding that well structured digital infrastructure can result in greater efficiencies that may even expose new opportunities to emerge is a powerful benefit of implementing a successful transformation project. Additionally the increased flow of data as a result of successfully connecting people and networks together can be used to better tailor the customer experience. There is little doubt about the potential benefits of transforming which explains why it is coveted on such a scale by companies.

Providing the designers of connected systems with greater insights about customer behaviour allows future services, products and systems to be designed to predict with greater accuracy the desires, needs and emotions of consumers.

A consequence of better customer experience is consumers not only anticipate having a better experience they expect one. This means the bar for the expected level of experience is always rising and with it the level of quality required and therefore the cost of achieving it.

Disruption is generative

We also have to be aware that we are dealing with new emergent behaviours, as well as new and interesting business models. Which in turn, create new patterns of behaviour that in turn require new value propositions.

These new and emerging patterns such as voice operated user interfaces, Virtual and Augmented Reality and the Internet of Things may have been unexpected or unheard of even just a decade or so ago but will become commonplace in the next decade. Such is the speed of digital change. Are you ready to embrace this level of change? Do you know where or how to begin? Who to hire?

Delivering better customer experience is innovative

Digital currently represents one of the biggest challenges for any company anywhere because the rules keep changing. This means working on staying ahead of the technology curve and this requires an innovative attitude.

You need to stay ahead of the customer's expectation so you can digitally serve them more effectively. This is what the modern digital customer expects.

This relentless desire for constantly improving customer experience forces companies to become innovators. However, how many companies can actually demonstrate innovative digital practices and business models that embrace digital behaviour?

The value proposition is king

The value propositions required for companies tackling the new emergent digital patterns of the future seem to reveal a similar strategic tell: the successful companies often focus on embedding a broader philosophy of customer-centricity excellence. They are looking not to just keep-up but be first through the door introducing their customers to new innovations and experiences before their competitors do. This is one of the ways they deliver value.

Becoming customer-centric is a key tenet of digital transformation and according to Gartner it is a toughly fought battleground with 89% of marketers now expecting to compete on customer experience. Essentially, to successfully compete in customer experience is to understand that you are competing on interactions, that means every interaction should be understood as part of a chain of decisions and responses that make up the overall experience. To deliver great customer experience we need to think holistically.

The improved communication that results from positive transformation highlights the most powerful lever in the equation and often the one that is lacking the most - design! By introducing 'design practice' across a company you help to facilitate different ways of thinking; different ways of acting so that any new investments in new technologies, systems and services can be better choreographed, considered in context and therefore scaled more easily and effectively.

Digital transformation often ushers in new technologies, that when designed well have the potential to leverage a range of efficiencies that can fundamentally change the way a business, even a market, operates. These changes often manifest through new business models and value propositions encouraging greater levels of customer-centricity. However, you cannot achieve improved customer-centricity through technology alone, you need a design strategy to guide your efforts so an Experience Transformation can be achieved. This means without a fundamental understanding of the needs and expectations of the customer you will in all likelihood fail in a very expensive way!

To illustrate the importance of design there is a listing called the Design Value Index (DVI) which measures a selection of digitally savvy organisations against the S&P 500 index. Every company on the DVI has outperformed companies on the S&P 500, by a staggering 219% measured over a 10 year period. How do companies on the DVI achieve such remarkable returns?

Design-savvy organisations have committed to ensuring design cascades across their companies which in turn demonstrates a much greater appreciation of design maturity and strategic design thinking. They are thinking about design and the benefits it could deliver, holistically.

These design-focused companies in the DVI all demonstrate huge market capitalisation values, many of them representing some of the most valuable and successful companies in the world e.g. Amazon, Apple and Google.

Recognising that design represents the missing link in quest for digital customer experience excellence is a massive opportunity and the companies listed in the DVI know it!

We would argue that any company undergoing a digital transformation with a supporting design strategy has a much greater probability of success. We suspect the 1 in 8 companies that actually succeed have a design strategy or a set of design objectives that has helped them transcend a perceived need for merely installing new technology and functionality. Such companies are thinking holistically and realising the benefits.

Shaping digital transformation

A design strategy that has its roots in user-centred research and design principles will contribute towards an enhanced level of UX maturity running throughout an organisation. Having a strong UX culture, following UX principles and supporting customer-centric processes will cultivate a much greater sense of purpose across teams. This feeling of purpose is what ultimately leads a company to seek increased engagement from customers.

Figure 2 : The relationship between design strategy and digital transformation

A design strategy provides the structure that is needed to maximise the potential that transformation programmes offer. It should maintain an objective view of the customer experience being created by considering all the elements that not only affect the customer experience, but affect the culture and sense of purpose cultivated within the business. This is what we define as Experience Transformation. 

Cultivating a Customer Experience mindset

The lack of a supporting design strategy will create what we call a 'customer experience gap'. This can be thought of as a gap between the expectations of the customer and the expectations of the company. If a bridge between business and customer value is not formed, the opportunity to create a powerful value chain with many supporting interactions is lost. Without this, it will be practically impossible for customers and the company to engage harmoniously.

Don't create a customer value mismatch

A customer experience gap forces customer confusion and creates uncertainty. People will not know how best to interact with a business. By not leveraging digital to deliver better customer experiences you are not capitalising on the opportunity to create greater efficiencies in process, cost savings and better resource management. When digital transformation initiatives spiral out of control, a poor customer experience will likely ensue.

To put it simply, when a customer fundamentally questions why they are interacting with your company because they do not know how to interact, you can be pretty certain you will lose their custom. Unless positive change happens, a poor customer experience will fundamentally affect and erode customer lifetime value, e.g. fewer new customers will be gained and more existing customers will leave. This could put a company at risk when customer experience standards drop and often results from market disruption or increased competitive threat.

No technology solution can fill a customer experience gap once a customer decides it is unbridgeable!

Creating an Experience Transformation

Customers are people too. The very people that make up the customer segments (audiences) marketeers want to influence. Customers have feelings, may act irrationally and are prone to making mistakes. Often it is ignorance of the emotional factors that influence behaviour and motivate people that causes initiatives to fail. This is increasingly more likely to happen when there is no clear and company-wide customer experience philosophy. Ultimately, this happens because there is no design strategy.

To create an Experience Transformation you need a design strategy to accompany and support your digital transformation program. Otherwise the resulting customer experience gap will keep increasing until you fail or become one of companies in the 84% failure category.

Ultimately, to drive value that will keep your customers engaged and their experience of your company relevant, the objective should not be a digital transformation, it should be an experience transformation.

In our next article we'll explore what a design strategy should cover, and how you can become confident that you have coupled digital transformation and Customer Experience together.

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