What questions should guide a digital transformation?
Knowledge@Wharton staff
Presented here for discussion is an excerpt of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
A new book from MIT researchers Stephanie Woerner and Peter Weill offers a field-tested framework on how companies can digitally transform, based on a years-long study at the MIT Center for Information Systems Research.
The book, “What’s Your Digital Business Model,” is framed around six questions for companies and business leaders to consider:
- What is the digital threat and opportunity?
- Which business model is best for your enterprise’s future?
- What is your digital competitive advantage?
- How will you connect using mobile and IoT?
- Do you have the crucial capabilities to reinvent the enterprise?
- Do you have the leadership to make the transformation happen?
In an interview on the Knowledge@Wharton show on SiriusXM, Ms. Woerner said companies need to significantly increase cross-functional collaboration in building a digital culture. More people across skillsets who understand what digital can do for a company are required. Said Ms. Woerner, “If you really look at the ways of working, we’re seeing a lot more test-and-learn, a lot more experimentation. But you can’t just experiment. You actually have to know how to take those experiments and then scale them up.”
Indeed, as its digital research advances, MIT is seeing that work is changing, becoming more flexible and more evidence-based.
“We’re also seeing that leadership has to change because they can’t just go with intuition,” said Ms. Woerner. “They’ve got to be willing to look at the data that all of their operations and their people are coming up with. It’s a lot more about communication. And there’s a really big piece about coaching because if you’re going to iterate and learn and experiment, you have to be able to give feedback on a continuous basis so that both people and the organization can succeed.”
A common shortfall is layering a digital business unit onto the enterprise instead of seeking fundamentally change. Ms. Woerner said, “There is some very complicated, deep background work that’s got to be done to pull off these integrated products and services.”
Discussion Questions
DISCUSSION QUESTIONS: Do you approve of the author’s list of questions to help prepare for digital transformation? Would you add or remove any? What are the biggest challenges for business leaders trying to affect fundamental change?
Poll
BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Cynthia Holcomb
Founder | CEO, Female Brain Ai & Prefeye - Preference Science Technologies Inc.
The biggest place where companies fall short is in not focusing on the customer. I realize that this post is about digital transformation in businesses. However, every business has customers even if they are internal users. The list of questions covers the essentials of business models, technology and leadership. But at the end of the day, it is the customers that have to engage and use the technology. Digital transformation will fall short with out engaging the people who have to use it, particularly customers.
These questions are a good start. I would be careful to capture the spirit of the transformation. Transformation includes more digital channels than merely mobile and IoT (what about social media, social selling, chat, voice-commerce, etc.?).
One of the challenges we see quite often is the desire to do it all, and to do it all in-house. Speed is of the essence. Getting omnichannel retail practices started is an excellent example of a transformation. Retailers need to get moving for most of the retail world outside of some western European countries. Yet too many retailers try to build their own software systems, and run their own transformation projects without help from experts. It’s best to bring in the experts and the software developed by specialists. The faster the transformation gets on its feet, the better for the retailer — and ultimately shoppers.
I believe that the study may have been broader than just retail, in which case some of these digital avenues do not apply.
The idea of posing questions to guide strategic change in an organization is more valid than just advice because it forces the leaders to discuss and come to conclusions that are appropriate and unique to the enterprise. It’s never easy but always worth the effort.
We are beyond the point of isolating your digital and e-commerce transformation efforts from your overall business purpose and strategies. Perhaps five to seven years ago, the need to drive a digital transformation was top-of-mind for retailers and brands as they faced a very dynamic and uncertain future. The most significant challenge with any digital transformation is the organization’s ability to drive a culture of sustainable change, and the need for inspirational executives who can evangelize the value of these transformative shifts.
The authors Stephanie Woerner and Peter Weill’s questions are certainly a good starting point for any digital transformation. However commerce and retail in general have evolved significantly to the point where both the digital and physical worlds are intertwined, to the point where companies should focus on the customer experience and journey beyond merely the digital capabilities and solutions to meet a new threat.
The questions are good. I’d also like to ask, “How will this impact the ease and convenience of both the customers and employees?”
Beware of S.O.S.: Shiny Object Syndrome. Just because something can be done, does not mean it should be done. Digital is a tool, not a destination. Tools must serve “jobs to be done.” Transformation should lead to better information, yielding faster and more accurate decision-making. Digital’s goal is to increase the satisfaction and loyalty of customers, partners and associates. Decrease friction and increase productivity. These factors must be included in any “digital” strategy.
Digital is much more than a tool. Digital advertising has passed TV. Programmatic is transformational and has even transformed TV buying. I have proven that an intelligent targeting strategy can double marketing ROI and that should be a goal for embracing digital. Yes, there are shiny objects (like gamification, IMHO). But digital is like oxygen to a forward looking organization.
I live in this space. The key determinants of digital excellence are: having a data strategy that is based on unified persistent IDs, having first-party data, using multi-touch attribution as well as MMM to guide media decision-making and, last but not least, having a fully articulated targetable segmentation strategy.
On the last point, 80 percent of digital is now addressable programmatically so we have moved beyond a mass media, reach-based world. I have created segments from frequent shopper data that produce 16 TIMES the return of ad spend of the campaign average. Is a marketer equipping for THAT? Of course, senior management has to get it and send a message, but really, these questions are generic and banal.
The list is as good as it can be. The challenges are: to believe that it is necessary to transform, to bring resources to the fore that understand the goals and the process to get there, to not do too much at one time, to convince the upper and middle management that the change is coming and to continuously monitor progress. The rest will come along.
I think the author covered most of the points. We built a model a couple of years ago that I think is a little tighter, but it all comes down to the same thing:
Leadership is always the wild card. Company leaders need the intestinal fortitude to tell shareholders that they can expect over-investment in all of the above until the transformation is complete. This is where Doug McMillon really earned his money. He had the courage to tell The Street that earnings would be lower for a while as the company funded its transformation. Of course Walmart is still recognizable, but clearly his initiatives have taken hold. Ditto over at Best Buy. It can be done.
These questions presume that every company needs a digital transformation. I’ll challenge that — because it puts specific technology ahead of strategy.
There’s no moral or financial imperative that says digital transformation results in a dramatically improved company — that’s true only on a case-by-case basis.
It’s also concerning that this mere question seems to presume that companies are tremendously behind — but I don’t see evidence of that. I see a lot of expensive systems that could be put into place and return small value at a great price.
Retailers need to keep leveraging digital tools to help their businesses. They also need the wisdom to focus only on those that are important.
Agreed 100 percent.
For my conversations with retailers and CPGs, the question is, “What does it actually mean to be a digital enterprise?” You must get tactical and define what your objectives are to help achieve any high-level strategy. Talk is so cheap in this discussion. You have to get uncomfortable and really dig deep to determine what in your organization needs to evolve and what doesn’t.
These questions are quite academic and all over the transformation map from organizational design to operational exploitation of technology. The starting point of digital (or any other tool) has to be the question: how must it serve us and how will we know that it is?
Adding an overlay of time related to the enterprise, its competitive positioning and a high-level project plan will enable sober thought and action that provide the highest return on time.
I’ve worked with so many retail companies that are looking at digital transformation — but it’s a lot deeper and more company-specific than these six (or eight) questions. There’s also a step function that must be thought through — you can’t think about threats to a business model until you’ve selected a business model. Much of this is re-wrapped SWOT, capabilities assessment, maturity, communication and basic strategy tools (somebody’s got to say it).
That said, it’s a great starting point and after reading the article and commentary, a framework that can help develop a solid transformation — especially when starting from scratch (although that’s not usually the case — I loved Brandon’s thoughts on intertwining of physical and digital, which all of us in retail are aware of).
The connectivity to mobile and IoT is the only question I would remove. It’s a Level 2 question and very much limits future vision. The other questions need to be placed into a linear series of steps to be effective for executives.
The article starts with culture, which is where it all begins, but then veers from that into minutiae that would hardly matter until there’s acceptance and appropriate change management (yes, I know — early 2000s comment, but very pertinent).
If business leaders need to follow this list of questions to guide digital transformation, then they are not likely to be successful. If they are not familiar with trends for the future, the range of technology available, or what it takes to create a framework for amassing and using their data, they do not have the information needed to answer any of these questions.
To be honest, I think the list is dated, or rather the product of dated thinking. It isn’t that the questions aren’t valid, it’s that they should have been asked ten years ago. Continuing this line of discussion is a little like talking about “e-commerce.” A some point e-commerce became ecommerce, because it just got to be dumb to put “e-” in front of everything.
By the same token today, I’d argue we should just be talking about commerce, recognizing that some is physical, some digital, some a function of IoT, etc. Digital transformation implies a nonintegrated approach, i.e., bolting on digital to existing organizational structure rather than integrating all systems into a seamless approach to a market.
As to the second question, in ANY transformation, leadership is always the most critical element.
I approve of the author’s list of questions. Deep, expansive questions, so much so, a non-digital employee or leader may pass out! Hence the challenge.
I agree — digital in itself is not the end game. The end game is a great customer experience, yielding loyalty, sales and happy customers. Enterprise systems both in hardware and human mindset are not built to be flexible. A barge set on a course. Also, human nature proves to be reticent to change, especially in large corporations. A conundrum confounding many business leaders.
It does not work to mandate changes to decades-old mindsets and business processes as they seem to carry an invisible shield propped up by the resistance to change. Who is left? Leadership. Focus the customer experience away from mechanics to human experiences anyone can understand. Turn on the corporate “aha” teaching employees how individual humans make the decision to purchase.
These questions aren’t a terrible place to start — anything that gets companies having conversations and throwing out ideas is a good thing. Some companies can’t start from nothing and need a bit of prompting to get the juices flowing.
The big issue with digital transformation is getting total buy-in. It’s no good if the whole business isn’t on-board because true transformation infiltrates all parts of it. You can’t just bolt a bit of social media onto one side or shove some screens in the store.
Another issue is tech and digital for the sake of it. Too many retailers fall into this trap. They need to remember that these are just tools for working better, giving better experiences to customers, better experiences for staff, greater efficiencies and more.
The questions a business needs to be asking itself is how it can use these tools within its specific business, for its specific challenges and clients. Doing what others are doing or halfheartedly doing it for the sake of it is pointless.
Successful digital transformation is synonymous with “being digital.” The answer to the question, “What is your digital competitive advantage?” may be that you should remain analog but do it differently in a digital world. Being digital means to review and transform your existing paradigm. Given all six points outlined by the authors, the last question regarding leadership is both fundamental AND mandatory. Without a committed and supported leadership, the prognosis for any sustainable and material success is extremely poor.
These questions are a fine start but are way too broad to provide much value for most of the companies and people who would be reading this on RetailWire. I can see how they can apply to truly “old school” businesses or as part of a Business School course on “digital transformation.” They do touch on the biggest challenge for most leaders which is the ability to take in data and various opinions and match them with their intuition and then clearly communicate where the business is heading.
I agree with the spirit of the questions, although for some businesses these may be too broad, or too specific (such as the mobile and IoT question which is more of an outcome than a starting question). In some ways, I feel these questions were more relevant a few years ago when most companies were still trying to get their digital transformation started and they were fighting against a culture that didn’t want to change. while there are many still in that position, others are now facing new challenges in executing their transformation and learning how to “stay digital” since this is really about defining a new process than it is a singular outcome.
For the execution piece, a good question to ask is “how are today’s internal systems positioned to support new digital models you’re considering for the business?” For retailers, this often results in new back-end systems for order management, for example, or improvements to data communications between headquarters, stores, and the data center.
Learning how to maintain your digital enterprise in the long-term should really flow from the culture change that should have occurred at the beginning and is where leadership is most crucial. It must not only be supported at the top but flow throughout the entire organization to produce a continued success.
The list of questions to help companies prepare for a digital transformation are good, but they only address the issue from an organizational perspective. What about the customer perspective? What about the employee perspective?
Companies need to understand what customers expect and value from a digital perspective. They also need to consider what digital tools will help improve employee productivity and customer service. The answers to these questions should drive the objectives for digital transformation and be the driving force to accelerate their digital transformation.