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What is Digital Transformation?

There’s no consistent answer on what digital transformation is

What is digital transformation (DX)? There are a thousand different answers to this, even within a team delivering the same digital transformation in the same company. I asked some colleagues and here are a selection of the responses I got; “we’re moving to cloud”, “it’s all about culture change, being more agile and adaptive”, “this is really a data transformation, it’s about us using our data better”, “it’s an organisation-level pivot, we need to move to a different business model”. These sound like completely different initiatives right?

I wondered what the rest of the business thought and so also asked several colleagues outside of the transformation team. I heard; “when we get cloud it’s going to be amazing, but until that happens nothing is really transforming”, “we’re doing this already, we went digital 30 years ago”, “it’s is just the latest corporate buzzword, it’ll pass when a new one comes along”, “I get that the world has changed and we need to change too to keep pace, but I don’t know what I’m supposed to do about it”, and most commonly “yeah I’ve heard a lot of chat about that, what is it exactly?”. It’s no surprise that so many of the people digital transformation will affect are utterly bamboozled, when the views of people leading digital transformations are so divergent.

The impact of this is digital transformation efforts are disjointed & failing to achieve breakthrough impact

I’ve heard very similar stories from other digital transformation leaders in completely different sectors. The impact of this status quo is that the energy of digital transformation leaders gets poured into civil wars where we each defend our viewpoint. If people in the wider organisation notice this, they either pick a side & perpetuate the dysfunction, or disengage and hope it’ll all pass without bothering them too much. Most people simply hear mixed messages about what this digital transformation thing is & what it’s going to do for the organisation and decide they have so much else going on that it’s not worth their time & energy to unpick it all.

What I think we all need is a stronger common narrative that’s easy to explain & understand. A narrative that is re-tellable and inspiring, that empowers people across our organisations to embrace and embed the changes that are needed to make organisations digitally transformed.

You can resolve conflicting views if you take a step back because there are 3 core common elements to all digital transformations

So what’s the right narrative? Should the digital transformation narrative centre around the technology, culture, data, customer experience, or something else? In my search to find this narrative I started out assuming someone had already sorted it. After dozens of books, blogs, white papers & frameworks, my conclusion is sadly I don’t think anyone has. Because the diversity of perspectives I got when I asked colleagues is mirrored in the literature on this in the consultancy & blogosphere too. Everyone who’s been through it describes their goals and journey differently. Every big consultancy’s white paper has a different recommended approach and maturity model. I was getting bamboozled too.

Then a pattern started to emerge, three things that are common to all digital transformations. They’re not always all described in accounts of digital transformation, but they’re always there under the hood. These three things are;

  1. Digitally seamless customer experience

  2. Capturing & exploiting corporate data

  3. Fast, agile & responsive product & service development

As I was listening to another holy-war erupt about whether this transformation is a data thing or a customer experience thing, or a product development thing, or a culture thing it hit me that we can all be right if we all take a step back and look at the whole picture. It’s not one of these three, it’s all three.

All transformations are business model pivots; DX is about the loop between channels, key activities & key resources

A great way to visualise this is using a canvas. Every business can be visualised on a Business Model Canvas. The BMC (and its mission-driven sibling the Mission Model Canvas) have 9 building blocks that together describe how any organisation turns a profit by creating & delivering value to their customers. Fundamentally digital transformation is an org-level transformation of 3 of the 9 boxes; channels (digitising customer experience), key activities (agile product development), and key resources (corporate data).

It’s not just about these boxes changing in isolation, they are all connected, they all reinforce each other. Imagine you reinvent your existing customer experience to a digital one. You design it in a way that it generates new user data then you use that data to rapidly design, test & iterate better customer experiences. Maybe even whole new value propositions, products and services. And repeat.

When we look at digital transformation from this 10-paces back perspective we can also really easily answer; When are you digitally transformed? Simply you’re done when you have this loop going as fast as you need to. How quickly do you regularly and reliably get from customer data to data driven product development to customer delight. This is where the culture & behaviours strand really comes in. It won’t even get you halfway there if you transform the three boxes in isolation, you also need them to connect and feed into each other at speed. How fast is fast enough? Well, that depends on what industry you’re in, and how fast your competitors are doing it. I’d take a guess that for most industries these days we’re talking daily at most.

Are these the only boxes that change during a digital transformation? No, probably not. They might not even be the ones that change the most because that all depends on where you’re starting from. The reason I've called these three out is it’s these three that are uniquely digital. Other flavours of transformations will major on other aspects of your organisation's business model. For a digital transformation it’s about these. It’s these that need to change for your organisation to be digitally transformed. Perhaps you need to bring on a new cloud provider as a Key Partner which means that box will change too, it’s not called out here because it’ll be in service of making this loop faster. Not as an end in itself.

Start your digital transformation small by creating a small loop for a niche area & then expanding, or by creating a big slow loop & then speeding it up

If you’re leading a digital transformation, one of the big questions that will be on your mind at this point is how to get there from where I am right now? Depending on whether you have a slow loop already in place, or no loop at all, the scale of the change needed up, down and across your organisation probably looks dauntingly huge. In start-up parlance a substantive change to any single box in a business model canvas is a pivot. This is a 3 box mega-pivot.

What’s the best way to get there? Which box do you transform first? There are logical & legitimate arguments for any way round but seeing this as a waterfall sequence misses the point. I recommend doing all three simultaneously, and then scaling incrementally. Think big, but start small. And learn by doing. The strategic choice I do think you need to make is do you either 1. Create a small loop for a niche area & then expand, or 2. Create a big but slow loop & then speed it up. The choice you make will depend on what’s right for your organisation. If you’re not sure, try both and see which works best.

There are two numbers that will show whether your digital transformation is successful

Whichever way you go, a good thing to baseline right now would be how long it takes to complete a full cycle of 1. Getting data about customer experience, 2. Using that data to generate improvement ideas, 3. Getting improvements back in front of customers, 4. Getting updated data about customer experience. Let’s call this number the Customer Feedback Action Loop Time (CFALT). Honestly, for my current organisation I think this is best measured in years. How quick are our competitors doing it? My best guess is minutes. This is the gap our digital transformation has to close to be successful. What’s your digital transformation gap?

Our CFALT & our competitors CFALT are the two numbers we can track to measure our progress & success against. These are the top-level metrics that matter the most and are inclusive of the customer experience, corporate data, and agile development angles. The warring silo’s can’t influence this number alone, they have to collectively contribute to the shared objective of moving the dial on our CFALT.

Mobilise your wider org with a simple strong narrative

So now we’ve got our transformation team aligned and aiming collectively for an improvement in one single number -the CFALT. How do we mobilise the masses and inspire the rest of the organisation to get on board? Every good narrative starts with why. Talk about what it is that is driving digital transformation within your company? Why is it important? Why now? It might feel like there are a lot of drivers; perhaps you’re looking to reach new customer segments, seeking to reduce costs, wanting to develop new value propositions? If you track each of these reasons back to the root cause I'm willing to bet that it’ll likely come down to this; you are losing ground to a competitor who knows more about their customers than you do & can act on that knowledge faster.

What we say to the organisation goes along the lines of; it takes our competitor this amount of time to receive customer feedback, act on it, improve their product or service & get updated customer data on whether their changes had the desired impact. It takes us this amount of time. To survive/thrive we need to be faster than the competition. How we’re going to do that is; digitise our customer experience so that we generate new/better data about how our customers interact with our products, then help product teams to access, understand & use this data to rapidly make improvements. What part do you play in this loop? What can you do to make it go faster?

There are countless stories we can draw on to demonstrate what good looks like. Everyone should find their own, something that speaks specifically to them & their colleagues. As long as the core of the story is the same, different stories will keep digital transformations alive & exciting. One of my favourites is a classic; Netflix. When Netflix digitised their customer experience from DVDs by post to online streaming, they generated loads of new data about their customers preferences & viewing habits. This data didn’t languish in a forgotten database, they used it to improve their service offering in both small (new platform features) and big ways (original content production). They didn’t just do this once, they’re constantly adjusting, innovating, checking the data, spotting trends, getting inspired and innovating again.

Which of your competitors or collaborators in your industry have gone digital? Can you see how they have leveraged a fast CFALT loop? If you can, how can you help your colleagues to see it too? Because once they do they’ll make your organisation’s digital transformation happen without you having to ask.

Key insights

  • Confusion about what digital transformation actually is causes confusion & disjointed transformation efforts

  • You can resolve these conflicting views if you take a step back; all digital transformations have three elements in common; digitised customer-experience, exploitation of corporate data & agility in product development systems, processes & infrastructure. These things are connected & when done right form a self-reinforcing cycle

  • Start small by creating a small loop for a niche area & then expanding, or by creating a big slow loop & then speeding it up. Tracking your Customer Feedback Action Loop Time (CFALT) is a single number that will tell you how successful you’re being. Digital transformation in any organisation is done when this cycle is established & operating reliably faster than the competition

  • Mobilise the passion & expertise in your wider organisation with a simple strong narrative

Leading a digital transformation & looking for help? Check out Yellow Cat innovation consultancy for corporates. We offer bespoke executive coaching, training and consultancy tailored to meet your needs.

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