Digital disruption has changed the way every business operates. New technologies create new markets that, in turn, create new customers and new competitors. And those customers and competitors are driving new expectations.
CEOs understand this. They expect their business to change more in the next three years than it has in the last 50, according to a 2017 survey by KPMG. And they’ve made digitizing their business a key priority. Still, 57 percent of them worry that their organizations aren’t equipped to respond to the rapid changes in digital technology.
What to do? First, companies need to understand that digital transformation involves the entire organization. Business and operating models need to change, as does the way employees at all levels work. And it means integrating high volumes of data to predict, influence and respond to customer behavior—all geared toward clear business outcomes.
1. Identify specific opportunities. Digital disruption is creating different opportunities for every industry. So companies need to harness the power of multiple disruptors, such as mobile communications, digital labor, the Internet of Things, and data and analytics to create new pathways to value.
Banks, for instance, need to understand that consumers don’t separate their financial needs into different categories. In their minds, budgeting, accessing discounts, entertainment, bill paying, saving and investing are all one experience. So banks need to transform themselves from mere holders of customer accounts into financial management partners.
2. Let customers dictate strategy. For a successful transformation, companies need to start with the customer and then work inward. This goes beyond “putting the customer first.” It means companies should take advantage of the same technologies their customers are using and act quickly on insights from analyzing consumer data.
Companies should be careful, however, of over-delivering on customer experience without regard to cost. Value is created by meeting customer expectations – no more, no less.
3. Transform the entire company. In our view, the fully realized digital enterprise is one that has articulated an enterprise-wide operational strategy that connects the front, middle and back office. That means going beyond customer-facing digital platforms and including middle office operations such as supply chain and procurement, as well as corporate services such as Finance, HR and IT.
According to the KPMG survey, 79 percent of C-suite respondents view aligning middle and back office operations to support customer experiences as “mission critical” or “increasingly important.”
The rewards can be considerable. A Harvard Business Review study shows that customers who had good experiences with a company spent 140 percent more than those who had bad experiences.
4. Change the corporate culture. To be successful in their digital transformation journey, companies need to change their operating models which requires rethinking traditional organizational roles and boundaries. That requires a significant change in the corporate culture.
Understanding this culture shift and developing an Organization Change Management strategy from the top down is critical. Just as digital disruption is industry-specific, culture change is contextual, so a one-size-fits-all, piecemeal approach is likely to fail. Successful culture change depends on sharing a unified vision, and engaging and inspiring employees.
Most of all, top executives need to lead the change, encourage innovation and take risks. In such an environment, digital disruption is not a threat but an opportunity to create smarter products and services.