Altimeter Group released their new report on The 2014 State of Digital Transformation by Brian Solis earlier this week. The central conclusion of the report, which is available for free download: “Only one-quarter of the companies we surveyed have a clear understanding of new and underperforming digital touchpoints, yet 88% of the same cohort reports that they are undergoing digital transformation efforts.” In other words, null
Companies revealed this surprising level of ignorance in spite of Altimeter’s clear definition of Digital Transformation: “the realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle.” Brian Solis added that companies needed to think of Digital Transformation as a “formal effort to renovate business vision, models, and investments for a new digital economy.” Yet, according to the report, “Even when explicitly defined, the term ‘digital transformation’ is still misunderstood.”
The challenge with this definition wasn’t the investment in technology. Rather, the realignment of business models presented the greatest challenge – the transformation part of Digital Transformation. In fact, different people had different misconceptions, sometimes based on their role. Strategists, for example, “often equate the term ‘digital transformation’ with a shift in technology investment,” according to the report. Solis added that the companies he interviewed were “thinking they are changing but in reality they’re only investing in technology. That’s not really digital transformation.”
Even more broadly, virtually all survey respondents (99%) believed that “Improving processes that expedite changes to digital properties, i.e. website updates new mobile or social platforms, etc.” was the most important part of their Digital Transformation efforts, and a full 96% also believed that “Integrating all social, mobile, web, ecommerce, service efforts and investments to deliver an integrated and frictionless customer experience” was equally important.
There are two essential problems with identifying such priorities for purported Digital Transformation initiatives. First, these priorities are largely a rehash of the move to the Web in the late 1990s, and second, they are not particularly transformative. Back in 1999 the story was achieving a single view of the customer via multiple channels or touchpoints – just as it is now. Digital Transformation calls for “a renewed focus on the entire customer experience,” according to the Altimeter report – the same priority companies had when they built their first Web sites.
Where’s the Transformation?
While some organizations confuse Digital Transformation with increased technology spending and others are simply revisiting their original move to the Web, Altimeter did uncover some examples of Digital Transformation that were truly transformative. “We’ve heard that digital — especially mobile — is often an afterthought or ‘bolt-on’ program to existing marketing efforts,” the report allows, highlighting the lack of transformation in certain efforts. “Yet it is the very thing that is changing customer behavior and preferences.” Changing customer behavior, then, is called out as one example of transformation, and mobile leads the way. The report adds: “the essence of digital transformation comes down to people and how their digital behaviors differ from that of the traditional customers before them.” But does supporting customers’ increased use of smartphones truly transformative?
Certainly most firms’ customers are becoming increasingly wired and tech-savvy, and thus companies must keep up with their dynamic customer landscape. Simply adding new mobile and social channels, however, belies the internal organizational transformation necessary to both meet changing customer demands and to do so quickly. Throughout their interviews, Altimeter “found digital investments have evolved beyond a follow-up to investments in traditional touchpoints and supporting systems. Now, they’re leading the way toward transformation.” Transformation not only of how such companies interact with customers, but also how they rise to the Digital Transformation challenge via internal reorganization.
Perhaps the most common organizational change at the companies Altimeter interviewed was the rise of new digital teams. “Digital Centers of Excellence (CoE), innovation teams, digital circles, and other cross-functional groups were banding together to apply insights, findings, and consistency across all digital touchpoints.” Paradoxically, Altimeter also found that “Although these digital steering committees are cross-functional, they don’t interact at the functional level.” In other words, such reorganization typically resulted in more talk than action.
Furthermore, these variously named teams generally focused solely on digital issues, and thus were only narrowly cross-functional, since they didn’t mix digital and non-digital personnel. In fact, this specific type of tunnel vision pervaded the discussion in the report, as most companies differentiated between their “digital customer” and other customers – as though these two groups were in fact separate. Altimeter called out this problem: “Customer experience, whether traditional or digital, cannot be meaningfully enhanced without looking at the whole picture.” Yet without the whole picture, how successful can Digital Transformation be?
Where’s the Information Technology?
Marketing departments led most of the Digital Transformation efforts discussed in the Altimeter report. However, if you read my article on Agile Enterprise Architecture featuring Netflix last week, you know I believe that Digital Transformation must involve an enterprise’s IT systems of record, and furthermore, such transformation requires both an agile approach to architecture as well as a cross-cutting reorganization that places both business and technical people on product-focused teams. In the technology world, such organizational and cultural shifts are at the top of many executives’ agendas, under the name DevOps.
I was surprised, though, that no mention of DevOps appeared anywhere in the report. In fact, Starbucks, Sephora, and Motorola were among the few companies that mentioned IT’s role in Digital Transformation at all. “At Starbucks, CDO [Chief Digital Officer] Adam Brotman understands a symbiotic relationship with IT is critical to getting digital projects off the ground and running smoothly,” according to the report. Quoting Brotman: “We have to have IT at the table collaborating on architecture, design, and some strategy. Then, once my team designs, strategizes, and product manages the scope, internal IT teams take those designs and develops against them. Through development, engineering, quality assurance, and infrastructure deployment, it’s important to know it’s a partnership.”
Clearly, collaboration between IT and the digital initiative is an important first step, but Brotman’s quote reveals a surprising lack of organizational transformation at Starbucks. Instead of following a DevOps model that would build true cross-functional teams across digital and IT, Starbucks follows a more traditional, “throw it over the wall,” siloed approach that frequently leads to long development cycles and uneven quality. (Note: Starbucks declined to be interviewed for this article.)
Altimeter’s Solis concurs. “There are steering committees, executive sponsorship, and change agents – but no strategy for architecting digital transformation” at the organizations he interviewed, Solis said. “There simply isn’t a lot of information on how to do this the right way. Not just faster but the right amount of change.” In fact, Altimeter found that architecture wasn’t even on the radar of the firms they interviewed. “There used to be a role for an architect as ‘planner’: enterprise architect, information architect, etc. Now there’s a need for an ‘experience architect’ who brings behaviors, customer expectations, and technology together,” Solis reported. Such architects, however, are few and far between, even on the more successful Digital Transformation initiatives.
Transform What’s Important
Does it really matter whether Digital Transformation focuses on customer interactions, internal reorganization, or technology modernization? Bottom line: if it ain’t broke, don’t fix it. The focus of any transformation effort should be on changing what needs to be changed in order to improve the bottom line, which always connects to the customer. So, if prospects are ignoring your marketing, fix that. If customers are unhappy with their interactions with your company, focus you’re efforts there. And if you’re unable to innovate and respond to customer demand at the speed the market requires, then by all means, put your energies into the changes necessary to become a more agile organization overall – which will likely include moves to DevOps and Agile Architecture.
Any of these efforts might be labeled Digital Transformation, although predictably, the more difficult changes will end up being the most transformative. As Brian Solis says, “The entire organization has to align and transform across all touchpoints.” null
Image credit: Sid Mosdell