Digital transformation has become an unavoidable buzzword in business over the past few years. In fact, a survey of senior executives released at the beginning of the year by North Carolina State University’s Enterprise Risk Management Initiative identified digital transformation as their top concern in 2019. As we near 2020, digital transformation has only become more important to executives— not less.
Even though everyone’s talking about digital transformation, practically no one’s succeeding in achieving actual transformation. The Harvard Business Review estimates that 70% of digital transformation initiatives fail— and these failed attempts created over $900 billion of waste last year alone. Digital transformation has become a way to throw lots of money at problems without achieving real progress.
What’s the secret to success in digital transformation?
Does that mean digital transformation isn’t important? Of course not. Companies that want to survive in the Digital Age need to be technologically savvy; customers demand it. The problem is that many businesses think about digital transformation primarily in terms of the tech. Many executives equate digital transformation with IT modernization, yet simply investing in newer digital technologies will not automatically bring gains in efficiency or profitability. Without a clear understanding of why they are investing in a particular technology, companies will inevitably be disappointed by the outcome.
The truth is that digital transformation is not about the technology.
The tech is a tool to better serve customers. Digital transformation, therefore, must use digital technologies to better address the customers’ desires, not simply achieve internal goals.
It’s a matter of mindset. Although a move to a Cloud-based document management system may, for instance, help a company better back up files and ensure remote access to documents, the advantages that really transform company performance will be those that impact the customer, such as more responsive customer service representatives thanks to quick access to relevant files. While new technology may further a specific internal business goal, the focus in digital transformation is ultimately external. It’s all about the customer.
Adapt or die
Far too many digital transformation initiative failures come down to a lack of understanding what customers really want— and why. Companies that invest in making an arm of their business that customers have no interest in more efficient are only amplifying existing problems. For example, a bank that uses technology to make the in-person loan application process faster won’t get much traction if what customers really want is a simple way of completing the application online outside of typical bank hours.
Digital transformation isn’t simply about modernizing the way companies already do business. Success depends on changing fundamental operations to better compete.
Retailers have certainly been confronted by this reality over the past decade. It’s easy to blame Amazon for killing physical stores, but it’s the customer who has been demanding things like a wide online selection, fast deliveries, and simple returns. Retailers who have provided these options have survived— and those who stuck with their old models have not.
Customers today have more choice than ever before. They are no longer stuck frequenting businesses they don’t like just because those businesses are nearby. Companies that fail to use digital transformation initiatives to fundamentally change how they operate and deliver value to customers fall behind their competitors. If a company can’t readily adapt, it dies.
Meeting the digital transformation challenge
Changing the status quo can be a real challenge. After all, letting go of longstanding business practices that may have even built the company can feel like an unnecessary risk, especially when the alternative requires trying unproven new options. Unfortunately, digital transformation cannot succeed without a true cultural shift. Innovations and new business models can improve the customer experience in ways that make a business sustainable and competitive for years to come. The tradeoff is that the customer holds the power, not managers and executives.
It may be tempting to avoid digital transformation in the hope of maintaining control, but every business today must face the reality that customers have already taken that control away. Consumers today feel empowered to demand companies address previously unmet or ignored needs. Unless businesses respond quickly, those customers will happily search elsewhere.
Digital transformation is inevitable. Companies that don’t embrace the advantages offered by the latest technologies will fall behind competitors who do. It’s not that these companies won’t continue to incrementally improve upon traditional offers; it’s that they will be prevented from quickly responding to changing customer needs.
This reality is why I have dedicated myself to advising only companies that make aligning real business goals with digital transformation initiatives simple, like Evo, which uses cutting-edge artificial intelligence to advise businesses on optimal pricing and supply chain decisions. As Chairman of their Board, I’ve seen just how well technology can be used when a customer-first mentality is built into the technology. If digital transformation is to live up to its grand promises, all companies must put the customer first and use the technology simply as a cutting-edge tool serving that priority.
About the author
Robert Diamond is Evo’s Chairman, and a successful entrepreneur with a track record of creating value from customer data.
After 13 years in the retail data space, in 2001 Robert founded what became emnos – the leading provider of ‘customer centric’ services and decision-support tools. Clients included top retailers (Target, Walgreens, Morrisons, Waitrose, Boots, Co-operative Group) and their FMCG suppliers. The business was sold to Palamon Private Equity in 2007 and then sold on to American Express in 2011. Robert moved on to an executive role at private equity-owned RAC Motoring Services, as well as overseeing a portfolio of private investments.
Outside of this Robert manages a private portfolio covering early-stage retail technology start-ups; lifestyle & hospitality investments; commercial & residential property; and classic cars. Robert is an elected member of the Young Presidents Organisation and regular media contributor (and TED talker) on the use of customer data. He lives in the UK and US with his wife and four children.