Companies are now competing with every other customer experience, not just within their own industries.
The growing number of businesses that were created specifically for the digital age are teaching consumers to expect faster, more streamlined and user-friendly experiences, self-service options, and personalized interactions. These businesses are also very good at anticipating and responding to customer needs before the customer even realizes they need it.
It’s essential that CEOs prioritize digital initiatives, something that we’ve discussed many times. This is a responsibility that falls directly on the CEO’s shoulders.
This road map is designed to help the organization prioritize a few bold initiatives that could have a significant impact on overall performance, and to focus resources accordingly.
One of the main reasons that digital strategies fail is that leaders approve too many projects. If a leader approves every project that is proposed, it is unlikely that any of the projects will have a significant impact.
Measuring performance should begin once implementation of the prioritized digital roadmap has started.
Digital transformation is a huge and complicated undertaking, so it’s important to measure progress to make sure all the effort and expense involved are actually improving performance.
In order to be successful in the rapidly changing digital world, companies need to start acting more like startups.
The following are key characteristics of successful digital companies that help them to achieve their objectives faster and with less risk.
1. Establish Clear Direction
The term “digital” can have different meanings depending on the context. A digital vision that is distinctive, well-defined, and inspirational can guide strategic choices and help an organization achieve its long-term goals.
The vision of the organization sets the priorities for what the organization should strive to do well, while also making it clear what should be de-emphasized or left out entirely. Is the focus more on growth, operational excellence, or superior service?
It is often helpful to express one’s vision for the future through tangible examples that the organization can visualize. This can help to generate excitement about what is possible.
This approach can help employees better understand what a company means by digital, be inspired by quick wins, as well as longer-term value, and provide a north star for the organization to rally around.
A strong vision won’t produce results without strong leadership from executives.
In order to adopt digitalization, typically a significant degree of change is required. Therefore, it is important that the management team understands, is supportive of, and actively pursues the value of digitalization across the firm.
Get the senior team on board with your plans as early as possible and keep them in the loop as things progress.
Make sure to get their input and feedback frequently to ensure that everyone is on the same page and supportive of the initiative. Companies that have seen success with digital transformation typically have strong leadership support.
2. Employ Agile Ways of Working
In the pre-digital world, companies would often try to create the perfect solution before releasing it to the market. However, in the digital age, this slow process often results in the solution being outdated by the time it enters the market.
Second, be data-driven in making decisions and take advantage of machine learning and AI. Digital companies that are successful operate with a new set of principles.
They prioritize their efforts and select a very short list of efforts to focus on. They also make decisions that are data-driven and take advantage of machine learning and AI.
If we want to be successful with digital programs, we need to realize that they require a very different skillset than what has been traditionally required. By concentrating our efforts on a few specific programs, we can make sure that they receive the appropriate level of focus and that we can learn from them.
Instead of taking a traditional approach to development, employers should use a more flexible method that allows for regular testing and adjustment. This will help to ensure that the finished product meets the needs of users.
Once the first set of features is being used by people, you can move onto the next set of features that need to be developed, or you can quickly realize that the first set of features is not working so you can try a different approach.
An approach that allows you to move quickly, reduce risk, and ensure customer needs are met.
Encourage your digital project teams to have a growth mindset, which means employees continuously strive to improve their skills and abilities. This approach is essential for businesses that want to succeed in the digital age.
A growth mindset is one that is always looking for new ways to solve problems, rather than relying on past assumptions.
The ability to explore new methods prevents groups from being restricted by conventional thinking.
This is a great example of how banks were able to respond to the 2020 CARES Act. In a matter of days, banks were able to accept digital loan applications from their small business customers under the Paycheck Protection Plan (PPP).
Banks had to be agile and fast, which was something new to them. The first products weren’t amazing, but they were good enough and were deployed much faster than banks were used to.
The initial solutions provided a foundation that can be built upon to enhance digital loan origination capabilities over time. They also showed banks how quickly they can make improvements.
3. Structure for Success
Organizations should create teams of people from different disciplines who are able to act and think like a start-up.
In order to be successful, teams need to think like entrepreneurs, and have a senior leader who is dedicated and has the power to make decisions quickly.
The team composition should be horizontal, with representatives from all areas that are necessary for the success of the program, such as strategy, customer experience, technology, marketing, operations, legal and compliance, and any others that may be relevant.
Team members should be fully dedicated to the team so that they are not sidetracked with other business responsibilities.
As a start-up, it is important to allow teams to explore, experiment, learn and fail. This means lowering the stakes and allowing the team to find the right path over time.
It’s crucial to allows yourself the freedom to experiment and explore new ways of working in order to build muscle memory and come up with the best solutions. However, it’s also important to set clear goals and measures of success from the beginning so that you can gauge how well you’re doing.
As the team moves forward, it must show how it is creating value, both for the customer and the company. Having visibility into how a new project produces value is crucial for maintaining momentum and effecting organizational change.
4. Return on Digital Investments
It is also important for CEOs to make a distinction between near-term returns, which are generally easier to measure, and long-term returns, which tend to be more difficult to estimate. It is essential and standard to measure the return on digital investment.
CEOs should look at the value provided by individual digital initiatives as well as how the initiatives collectively support strategic organizational goals.
It is also important for CEOs to distinguish between near-term returns and long-term returns. Near-term returns are generally easier to measure, while long-term returns are more difficult to estimate.
Remember that there is no such thing as not moving forward; if you make little to no investment compared to others, you will fall behind. Therefore, investing digitally is also about preventing loss.
If you want to get the most out of your investment, we suggest you focus on improving one business area at a time. Once you’ve seen some success there, you can start expanding to other areas. This will help you gain momentum and maintain a clear direction.
A company’s “domain” is the area in which it operates. This can be a critical process, customer or employee journey, or function. For example, a marketing domain for a consumer-goods company might include customer acquisition, pricing, cross-selling, and retention.
Organizations can transform multiple domains at once to save time and expense. This allows organizations to leverage similar data sets, technology solutions, and team members for multiple use cases.
A retailer can leverage investments in data preparation by using the same geospatial and store data to optimize store footprints, prioritize capital expenditures, and personalize local assortment.
When use cases are linked, a team that consists of people with different functions can work together to deliver value across the domain. This often results in a value that is greater than the value derived from use cases that are single and disparate across different areas of a business.
Another way to ensure you are getting the most return on investment is to make sure you are investing enough resources in promoting the adoption of new digital tools. The usefulness of an interesting predictive insight is only as great as the response it enables.
Data that identifies which customers are most likely to buy from a competing company can help retain customers, but only if employees responsible for marketing or sales take action to keep those customers happy.
In that example, the team building digital or analytics solutions not only have to build a tool to surface the insights for marketers but also redesign the marketers’ workflow to enable action.
Additionally, the company should establish change-management programs to promote the use of the new solutions.
The study found that successful companies were four times more likely to spend half their analytics budgets on adoption and change management.
Many companies experience their greatest returns when they direct their digital investment towards growth initiatives. However, taking a bolder approach to efficiency gains can also result in significant returns.
5. Percentage of Annual Technology Budget Spent on Bold Digital Initiatives
Organizations that only spend a small amount on enabling digital initiatives are not likely to get the most return on investment.
CEOs can use the allocation of technology spend as a leading indicator to make sure the organization is able to deliver value that is supported by digital technologies.
The way businesses handle technology is changing. Instead of one large system, businesses are moving towards microservices, which are small, specific tools for different uses. They are also customizing applications more to fit their needs.
Creating products and services quickly and efficiently will allow teams to get the most value out of them. People who are comfortable with technology have used these tools to take over many different areas.
However, many companies that have been around for a long time are still stuck using technology that is very complicated and takes up a lot of resources.
The research suggests that many banks are only allocating 8 percent of their digital budgets towards business-improvement initiatives that could help with growth, with the remaining 92 percent going towards infrastructure and maintenance.
A sustainable business cannot rely on a single paradigm, given how quickly innovation and disruption are occurring.
Most digital attackers and digital-banking ventures that are backed by venture capitalists focus their resources on actions that will have a significant impact, such as expanding to new markets, enhancing customer experience, or increasing efficiency.
The writer believes that banks should spend at least 25% of their budget on digital initiatives that will help the company grow. This is because these initiatives are usually aimed at the most profitable segments and products within the company.
The reason that incumbents spend so much money on infrastructure and maintenance for digital systems is because those systems are outdated and full of code in old languages.
Companies should not simply replace old systems, as this can be expensive and disrupt business processes. Instead, they should focus on simplifying and renewing the systems that are most important to the company.
One bank in North America decided to improve its technology platform by making a set of microservices. They prioritized areas that would let them develop apps more quickly.
The bank achieved a 30 percent decrease in the cost of making changes to core systems, which shrank the time to market for new digital products from more than 12 months to just three or four months.
The company’s customer-satisfaction scores increased significantly, and revenue from digital offerings grew from a small percentage to more than 40 percent.
Companies that traditional companies that don’t change their IT systems will never be as flexible as digital attackers. However, they can still be strong competitors in the digital age by improving other areas.
6. Time Required to Build a Digital Application
In a digital organization, it is critical that ideas can be quickly translated into tools that can be used on the front line.
If you’re not moving quickly, you’re falling behind. This is especially true in today’s landscape, where things move at an unprecedented pace. Many organizations don’t even know how they compare in this area.
We believe that applications should be released as soon as possible.
A model that predicts customer churn or identifies microsegments should take less than four months to implement in a real-world setting.
A software application tool should take less than six months to be introduced. (Exhibit 2)
Organizations are taking a long time to complete builds, because they lack agile continuous-delivery processes. They also have to deal with a lot of documentation and requirements that are not related to the functionality of the product.