Recently a colleague asked me about Digital transformation, and how best to express it; and more importantly, what practical steps to take to start to achieve it.
As I understand it, Digital is about using information to shape your product line and sales strategies to the ever changing market, using the technological capabilities of the modern age to tailor your product offering and operate at lower cost.
It is not achieved by simple having a website!
Moving to Digital is a business strategy that leans on IT’s capabilities, it is not an IT strategy. Digital is moving from selling products that consumers use to fulfil their needs to selling the actual use – servicing the NEED – your tangible product may be part of that but the engagement is based around the customer not around you.
To illustrate this, consider this evolution – a hard working peasant farmer with his cart of cabbages some time in the middle ages. One man – some cabbages, selling them to people that a) find him, b) want a cabbage for whatever purpose. Now fast forward a few hundred years and his cart has become a shop, another hundred years and a catalogue is published for mail order and then last week he launches cabbage.com. Massive progress, but hold on, still one enterprise, some cabbages, selling them to people that a) find him, b) want a cabbage for whatever purpose. Finding him is now easier due to the internet but fundamentally this is still the same concept.
This is not a digital transformation; this is channel shift to new channels as they become pervasive. There has been more than one company disappear from the market place that had full channel coverage but hadn’t innovated their product line.
Mr Cabbage man is still fundamentally selling the same product and expecting the same approach from the customer. The customer must still have a need that they identify with your product, approach you to purchase it and then use the product to address their need.
Going digital is more like the next step from the data driven product placements that have been so effectively used by the supermarkets. Through extensive data analysis of purchases, footfall, and buying patterns the supermarkets have been able to change their layout and merchandising to better tap into the underlying need of the consumer. Originally the shop would sell ingredients, it was the consumer’s need for a meal that drove that purchase but it was still down to the consumer to identify which ingredients were needed and later to assemble them into a meal. The introduction of ready meals in the 1980s was a product shift based on addressing user needs. Digital is the next step along that path.
Going to Digital means the ability to have a comprehensive understanding of your customer, and then offering services (based on known experience and products) tailored to the exact customer. Technology now gives the possibility of providing specific services to the individual and then automatically matching them to the best service offering. This is can often be done with minimal human decision involvement enabling much lower cost to operate.
Many IT buzzwords start to crop up at this point: Big data, CRM, analytics. These concepts are what really lies behind Digital, it isn’t really the IT stack or web screens – that is just what it needs.
Moving to Digital is considered a challenging cultural change because the change is not in the IT department – it is a change in the business, in the product offering and your understanding of their customers and your USP, IT will help you deliver the new world, but cannot lead it.
Many companies are now employing a Chief Digital Officer (CDO), this is a very difficult role because they are responsible for breaking out of IT, you could argue (if looking for sensationalism) that their job is to destroy the IT department – to bring technology into the heart of the business to be something we all do, not something “they” do.
It somewhat misses the point if the CDO sits under the IT director and is basically manager of online product offerings, although they would be in good company. I would imagine that the relationship between CIO and CDO would be at times tense, and to work they must be equals.
But practically speaking what are good steps to take to a digital transition:
- Understand who your customers are, and more subtly why your customers are. What is it about you that makes them come to you – or “come back” to you.
- Next ensure that the data that you are currently capturing is accessible – and cross referenceable, and not just along the existing product hierarchies. I remember back when I worked in retail that we could give really detailed sales information along product lines and store lines, so general merchandise, men’s shirts, that range, that size, in blue. But if you wanted aggregated info you were limited to that hierarchy, so you could find sales for all shirts in that range, but what was needed was sales for ALL BLUE clothes… but that basically meant you had to know the code for every blue item and run a query asking for each item in a list.
- Then add some analytics on existing product lines.
- Then get someone to actually look at this stuff, someone with a CRM background – there is too much critical work to just add this to someone’s existing work.
All these steps will help your organisation understand what it is selling, how and to who and why. From there they can try to understand what your customers are really wanting (of which your existing product is a part), and then you can start to consider what service you can offer to address that.
Don’t rush to solutionising a software build to a problem you haven’t validated and you can’t just point to a picture of your product on a web screen and declare digital success.