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Opinion: Digital transformation is no pain no gain

05 Oct 2018

Article by Gartner customer experience senior research analyst Augie Ray

Is there any business catchphrase more ubiquitous nowadays than “digital transformation”?

Everyone craves the agility, innovation, relevance, engagement, reputation, loyalty, and brand advocacy that digital transformation promises.

But how many are willing to do what it takes to achieve the sort of digital transformation that matters? If your organisation wants a meaningful digital transformation, then it must be willing to do enough to make it worthwhile; otherwise, you are just putting band-aids on a gaping wound.

What does “doing enough” mean? That depends on many factors, such as your category, legacy systems, culture, the frequency of acquisitions, disparate systems, centralisation, global footprint, and other attributes, but the most important factors are your openness to risk and your willingness to invest what it takes. In short: No pain, no gain.

Today, many traditional organisations cast a desiring eye upon their upstart competition having “benefits” such as agility, private equity, and newer technology unburdened by legacy systems. (Few, however, would take the corresponding drawbacks of cashflow urgency, bootstrap mentality, and–ironically enough–the lack of legacy reputation, customer base, and institutional knowledge.)

The difference is that startups are permitted (in fact, encouraged ) to take business risks, invest heavily in building the right tech stack, and take losses against future gains. Meanwhile, traditional public companies are beholden to Wall Street expectations for consistent quarterly results.

This is why the key to digital transformation isn’t going to be found in your IT department but in the C-suite. What risks are you willing to take? Can you put a portion of today’s business model at risk to create tomorrow’s? How much are you willing to invest? Can you tell your shareholders that transforming your company for success tomorrow will involve increased costs today?

I regularly speak with business leaders who tell me they want to emulate Amazon, but Amazon lost almost $3 billion before turning its first profit.

And well after Amazon established itself, it continued to prioritise innovation and market share over margin. And Amazon took risks—significant risks.

It launched Amazon Prime and AWS and won; and it lost on the Amazon Fire Phone, which Amazon pulled little more than a year after it debuted. Of course, few want to emulate Amazon’s losses, its purposeful reduced margin, its considerable R&D costs, and its risks. They want to be Amazon without doing Amazon.

Today, Amazon is one of the largest companies in the world and Sears is a penny stock. There was no reason Sears, with all its assets, brand equity, logistics, experience, and other advantages couldn’t have done what Amazon did — no reason other than its unwillingness to take risks and shift priorities from short-term profit to long-term relevance and brand health.

When making a digital transformation, the way to reduce risks and ensure your investments pay off more quickly is to start with the customer.

Use effective customer experience processes to know and understand your customers’ wants, needs and expectations.

By starting with the customer and switching your perspective from inside-out to outside-in, you ensure your digital investments are directed toward the sorts of efforts that build relationships, deliver loyalty, raise margin, and change perception.

Too many companies do the opposite, spraying and praying their digital investments will pay off, which is why the digital past of many firms is littered with unused mobile apps, forgotten microsites, abandoned Second Life islands, neglected Twitter accounts, and ignored Alexa skills.

Build what customers want, will use, and drives their satisfaction, loyalty, and advocacy, and your digital transformation is more likely to quickly produce the results stakeholders expect.

Short-termism kills brands. It makes leaders focus on financial results rather than customers. It causes them to strive to eliminate risk rather than embrace and manage it. And, it leaves them saddled with aging legacy processes, tech, reward structures, and thinking.

Companies too often assume they can take an incremental approach to solve their legacy issues, but like a person who knows the cost of everything and the value of nothing, they end up saving a little cash but miss the slow grinding loss of efficiency, agility, talent and customer trust, satisfaction, and preference.

No pain, no gain.

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