In one of the comments of my latest article (“Ensuring the essential”), I was asked by a friend: “Ok, but, from a shareholder standpoint, does digital transformation add value? What is the return on the investment?” And that made me think about how “digital transformation” might have become just one of these buzzwords. I believe it’s a consensus that most traditional, non-digital born companies must go through a technological transformation if they wish not only to survive another decade but also to improve its performance or, maybe, “disrupt the market” (oops, another buzzword!). However, true digital transformation is a complex process that should integrate new digital tools, new business models and new ways of working with existing sources of competitive advantage and a laser focused commitment to results.
Of course, it is impossible to undergo transformation without investment, strong change management and a certain degree of risk. But managers have the duty to find the balance between exploring new ways of doing business and preserving the bottom line, seeking innovation while focusing on the benefits such innovation will bring.
“Managers have the duty to find the balance between exploring new ways of doing business and preserving the bottom line”
In a conversation with a member of my team, who joined us a few years ago from a company that invested heavily in technology without generating the expected returns, we discussed what lessons could be learned to increase our chances of success. And from this discussion, we created a list of five important digital transformation rules that we do our best to follow:
1) Start with a clear value proposition for customers
A big mistake in digital transformation is not having a clear value proposition for customers. It can be a risk for any company – the team has a seemingly great idea, but the end-user benefits are not there at the time the new product or service is launched. An associated problem is a lack of customer involvement in the development of the product, with the team not spending enough time with users to obtain real-time feedback and to adapt accordingly. In addition, from my experience in commercial B2B services, I have come to realize that we should talk to not only the customer who is the final user of the application (in our case, the POS owner) but also all of our sectors that touch the customer (e.g., field sales, logistics). Field sales teams, for example, must understand the product and the customer value proposition, as they also need to help customers with adoption and be satisfied for the company to get the full potential of the use of the digital application.
2) Create internal pull and not push
Even when the new digital application has value creation potential, it’s not a given that it will be received with open arms by the organization. Every change brings a certain degree of pain and move people out of their comfort zones. Therefore, a big risk that’s always present is the temptation to force it down the organization. Leaders may talk about the new applications in their presentations and the team responsible may explain how their innovation is a great proposition. But none of that matters if the internal teams are not convinced and engaged. People should be pulled toward your product given its quality and track record of improved results in pilots they can visit and see by themselves, not pushed into implementing a tool they haven’t really bought into yet.
3) Big investment must come after proven results
Trying to scale up a new project before it has proven successful is another road to failure. Ambition is good – at the right moment. We commit to never invest a huge amount of resources and money up front. First, we test whether the idea solves a real customer problem and has a clear path to profitability. It’s important to avoid scaling up before the potential has been verified or before cultural challenges have been addressed. In a moment that being digital is almost a must for any company, I notice that leaders often face the temptation to accelerate any idea that sounds exciting enough. But good things take time. We can’t rush to claim success too early or ever let our ego interfere by pushing towards an unproven solution or not acknowledging disappointing results when they happen.
“A big mistake in digital transformation is not having a clear value proposition for customers”
4) Use carefully selected KPIs
KPIs can be a big bad wolf disguised as a very white sheep. At ABI, we love all kinds of metrics. But the goals must always be tightly tied to the purpose and strategy of the business, demonstrating whether real value is being added. Poorly selected, irrelevant, or disconnected performance indicators are a tremendous risk. Misleading KPIs may give a false sense of security that everything is being measured (and even going well), without providing any concrete insight into how the project can improve or worse, not safeguarding a greater customer satisfaction or an increase in bottom-line results.
5) Consider the trends and not the current state of things
A common mistake any company can make is to ‘skate to where the puck is’, rather than where it is going to be. Decisions should not be made based on the current state of the market but on future expectations for how the world will be, anticipating future trends. A typical example from the recent past was investing in on-site servers instead of cloud-based solutions, limiting the flow and access to data.
Although new learnings happen every day, these are five important lessons that we recommend and will apply in our Digital Transformation journey in order to protect and add value to all stakeholders including customers, colleagues and shareholders.