Deliver Successful Digital Transformation: Think Outside-In
This blog post is the second in our three-part series exploring why digital transformations fail and what businesses can do to make them real.
Many companies that undertake a digital transformation are often, in practice, only taking small steps. They look at where they are now, what the current needs of the businesses are, what they can see is broken and undergo a “transformation” to address these, and only these, topics. This is incremental change, rather than a digital transformation. Beneficial? Absolutely. But it’s only bringing a fraction of the innovation, differentiation and value that true transformation can offer. With an incremental approach, real, meaningful change ends up happening too late, or never at all.
Borders, founded in 1971, was an international book and music retailer that was unable to transition to the new business environment of digital and online books, closing for good in 2011. Among its missteps were opening too many stores and embracing e-readers too late. By not understanding the cultural and technological trends of the time and how its customers’ needs were changing, Borders moved in the wrong direction.
Toys “R” Us had an even longer run, from 1948 to 2017. Incorrectly gauging the market and business model, Toys “R” Us signed a 10-year contract to be the exclusive vendor of toys on Amazon in 2000. When Amazon began allowing other toy vendors on its site, Toys “R” Us sued, but by then it had missed out on developing its own eCommerce capabilities and online presence.
Twitter understood the opportunity for a video-focused social channel, but its Vines failed to capture a new audience that would use it, ceding the way for the explosive growth of TikTok.
For many businesses today, the answer to this sort of constant change is the powerful agility that a “composable” approach can bring. But that agility can only be leveraged if a business has a clear vision and strategy for the future. Unlike “monoliths,” a composable approach consists of independent components, each providing a particular business capability. This modularity gives businesses the flexibility to quickly scale and to change capabilities, or even add whole new ones — to go beyond small steps. It’s a vital tool for the times. Understanding how best to take advantage of composable as part of a digital transformation requires a business to look at what it can learn from the outside — from both future trends and new audiences in other industries and sectors.
Framing the Future: Exploring In- & Out-of-Sector Trends
We can’t predict the future, but that makes it all the more important for businesses to invest time in thinking about the range of possibilities.
No one expected the COVID-19 pandemic. Businesses were forced to pivot, and to do so quickly. Some succeeded, but many more were caught off guard.
Now we’re trying to untangle generative AI and what it could mean for businesses. When should they use it? When are they allowed to? How can it accelerate process? How accurate is it? When might it cause more legal headaches than it’s worth?
To create the right transformation, businesses need to start thinking about potential trends early when defining their transformation strategy. They need to look at their own sector and far beyond. What are the broader trends in digital? What changes are occurring in other sectors that might, one day, cross over? How are audience needs and expectations shifting? For MAPCO, a convenience and gas station chain in the U.S., we created the convenience store of the future. We took a tour of cutting-edge options in the food, hospitality and retail space to better understand how some of the newest innovations are working. From robotic kitchens to indoor farming startups and grab-and-go checkout models, understanding industry shifts enabled the formulation of big ideas and concepts.
Bringing together senior leadership to explore and debate future trends, and the shifts they could lead to in a sector, can help stretch individual mindsets beyond the confines of their day to day, and create a mandate for change from the very top of your organization.
Look to New Audiences
As we discussed in part 1, successful digital transformation must consider the customer. Research is an essential component to ensure the pain points and unmet needs of your customers are understood and addressed. But it can — and should — go even further.
Customer research should look beyond your current customer base to new, emerging audiences, as well as existing audiences you want to acquire. It needs to extend past your own CRM and leverage partners and services to reach untapped audiences. You must understand how transforming the business can enable it to engage in the right way with a wider spectrum of customers.
Taco Bell used to position itself as the place to go for inexpensive Mexican fast food. That strategy worked for a while, but when sales started falling, it successfully repositioned itself as a youth lifestyle brand. Upscale locations. Open kitchens. Menu experiments. All to target new audiences.
Target has gone through a similar transformation, from a discount store for consumables to a place for Gen Z’ers to find trendy apparel and home décor.
New audiences will continually emerge, and behaviors will regularly change, whether it’s from fresh economic uncertainty or the next tech trend. Whatever happens, you need to be prepared for it.
Learn to Speak the Same Language
Having an open mindset and looking beyond your own sector and customers at what might happen next is vital to create a transformation that is successful in the long term. Such a mindset can, and should, also be applied when looking at an individual function or business unit (BU) within an organization. If you’re looking to transform your presence in a specific region, or to transform an aging department, looking only inside the area of focus won’t create effective change. You must understand the relationships, needs and lexicon of the other, connected parts of your organizational system.
One of the most significant barriers to looking outside of a function or BU is that of language and terminology. When the same words can mean different things to different people inside the same organization, connecting outside your own domain can be challenging. Our digital transformation research found that 79% of leaders surveyed agreed or strongly agreed with the statement: “In my company, the technology organization struggles to speak business, and the business struggles to speak technology.”
Bringing people together early in a transformation program, and establishing a common glossary of terms, can help greatly in connecting different perspectives to create the right vision for the future.
As humans we’re programmed to have a fight or flight response to the unknown. To fear what is outside our own, known sphere. For digital transformations to succeed we have to overcome that fear, to be open to new perspectives. Businesses must look not only inside-out at what’s already familiar, but also outside-in, at what’s happening in the wider world, to understand the risks and opportunities that exist. Composable is a powerful transformation tool, but only if it is informed by a clear, thoughtfully considered vision and strategy.