Digital means different things to different people. Social. Mobile. Cloud. The Internet of Things. Big Data. All of the above. Ask five executives and you’re likely to get five different answers. But no matter how you define it, interest in all things digital has skyrocketed in recent years. According to a recent survey, 76 percent say digital technologies are disrupting their industry to a great or moderate extent. And, consider this graph showing the popularity of the search term “digital transformation” on Google.
Given the intense focus on digital, a certain amount of digital fatigue or even digital exhaustion at this point may be understandable. Many companies have already made significant investments in digital, and it may be temping to think that they’re finished now—or at least close to it. But for the most part, the short answer is “No. Not yet.”
Companies that fail to innovate, adapt and transform aren’t likely to be around for long. According to the consulting firm Innosight, the average lifespan for a company in the S&P 500 dropped from 61 years in 1958 to 25 years in 1980 to 18 years today. What’s even more astonishing is that, at the current churn rate, 75 percent of the S&P 500 will be replaced in 25 years.
In the face of these changes, most companies face additional digital gaps that will take additional time, energy, investment and leadership to address.
The (Digital) Underground
When most senior leaders think about digital they tend to think primarily in terms of the presentation layer—in terms of direct customer interaction. Things like mobile apps, social media, and website design spring to mind. But, these initial efforts just begin to scratch the surface of the real transformation that is needed.
For companies to survive and succeed in the digital era, they need to make sure their underlying core operating systems—the layers before presentation to customers—are integrated and scaleable. And, this requires them to address common gaps related to the way work gets done inside their companies.
The Culture Gap
“Our traditional teams are too slow. We’re not prototyping fast enough, not innovating fast enough. We need to systematize change.” – Beth Comstock, Vice Chair and CMO of General Electric
Cultural change is hard and requires tremendous leadership. So, its no surprise that many companies are still far from integrating new ways of working and new management mind-sets into their digital DNA. What exactly does it mean to change a culture in this regard? Every industry and company is different, but a few common themes have emerged.
- Willingness to Address Deep Change
For many organizations facing digital disruption, the degree of change required to remain competitive can feel staggering. Long established ways of working, talent strategies, business processes, ingrained beliefs, incentives, technologies, organizational structures, etc. all must be reconsidered and potentially changed. When deeper change is needed, top executives play a crucial role. They have to make clear why change is needed as well as the scope and focus of the change.
Consider the case of David Krantz, the CEO of YP, as he led a transformation of YP, formerly known as the Yellow Pages, from print to digital. For decades, the yellow pages book provided consumers with a quick and easy directory of businesses. As more and more consumers shifted to digital, YP shifted as well, creating online and mobile products. However, the company wanted to do much more than simply create an electronic version of the yellow pages. The digital transformation of the company included the creation of a full suite of digital marketing solutions for small and mid-sized businesses, the introduction of search engine marketing, and new placements on local online directories.
Krantz understood that the people part of the digital transformation is the most important part of the equation. He decided to get in front of every employee over a year and a half period—a challenge in a large company with a very distributed sales force. As Krantz describes it in a recent interview with Harvard Business Review, “I decided I wanted to get to those offices in their locations. So I got to Baton Rouge, and Modesto, California, and Sacramento. And often were places where people told me they had never seen a senior executive before in person, let alone the CEO of the company.”
- Speed and Agility
“We are moving from a world in which the big eat the small to a world in which the fast eat the slow.” – Klaus Schwab, Executive Chairman and Founder of the World Economic Forum
When organizations embark on digital transformation journeys, many realize that they need to become faster and more agile. As Scott Cook, CEO of Intuit, remarked, “I got sick of wasting months and years of engineering time on products that just weren’t going anywhere and weren’t changing customers lives. So, as a result, we’ve recently blown up the way in which we develop products.” Cook and other executives are introducing Lean and Agile principles and techniques to use both money and human creativity more efficiently and effectively. They are reducing the time it takes to introduce a new product, a new feature, new marketing or a new customer experience. Inspired by lessons from Lean manufacturing, they rely on empirical results to validate learning. This is brought about by rapid experimentation. The approach focuses on learning what customers actually want and measuring actual progress, and it encourages organizations to shift directions with agility.
- Cross-Functional Collaboration
Transformation requires business and technology groups to end any form of troubled relationship and create a true digital partnership. The very nature of digital engagement with customers creates new interactions in new channels and generates new data—all of which demands cross-functional collaboration to deliver an integrated customer experience. When CMOs consider some of the best sources of customer data, they often discover that it exists internally—in data stored in the customer service systems managed by the COO. And, consider the case of CMO and CIO alignment. Once they were leaders of functional silos but now require much tighter alignment and closer collaboration.
At Akamai, investments in marketing and technology alignment have paid off handsomely. Akamai’s CMO, Brad Rinklin, and CIO, Kumud Kalia, have been co-captains of Akamai’s digital transformation and have worked steadily to bring IT and marketing into better alignment. The pair were recently interviewed by CIO magazine. “Considering we’re a $2 billion company, Kumud’s team helped marketing launch a brand-new website with a brand-new [content management system] and a brand-new marketing automation system while overhauling all of our marketing lead processes and doing an integration into our Salesforce automation engine,” Rinklin says, adding that all those projects were done in one calendar year and there was no downtime. Overnight, we went from our old system to our new system and it all worked fantastically,” he says. “We couldn’t have done that as a marketing team alone or just asking for some IT help. We had to do this as a partnership.”
- Business Process Change
Teams working to build new digital capabilities in their organizations often fall into the trap of myopically focusing on technology while downplaying the importance of communication, change management, and business process impacts. When Jaemi Bremner and her team were implementing a new marketing automation capability at Intuit, they recognized the degree of change this new capability would require to the way work gets done. As Bremner describes it, the change in business processes was like going from an “orchestra,” where team members followed a carefully crafted, pre-defined plan, to a “jazz band,” where teams could experiment and change course based on customer feedback and behavior. While 22% of the program budget went to license costs, 45% of the budget was devoted to “enablement”—to internal communication, process change and training. Bremner shared a diagram similar to the one below to illustrate conceptually how her team considered the role of technology, data, people and process in the program.
This allowed them to inform Marketing leadership earlier of the types of talent enhancements that would be needed. It allowed them to proactively influence the key individuals whose support would be critical for adoption and feedback. And, it allowed Intuit to re-think its business processes with the goal of placing the customer and the customer’s experience front and center. Based on her team’s experience, Bremner recommends spending 50% of your budget on capability building to ensure your technology investment has ROI.
Integrating Digital into the cultural DNA of your organization takes time and effort, but the benefits can be significant and long-lasting. It can be the key to getting your organization moving at the pace of the Digital and Social Era and meeting customer expectations for a great experience. It can help teams collaborate across traditional functional silos. And, it can increase the likelihood that your technology programs, by incorporating people and process, will have a ROI.