Brace for impact
(Any) Digital or die?
In this era and age, the current business mantra seems to spin around a fundamental choice: become digital or die. While we are observing a landscape change and emerging technologies are making this change more turbulent, among the biggest mistakes companies are committing today, two stand out: treating digitalization and digital transformation as a checklist, and placing too much hope in nurturing digital entities separated from the core business.
The digital transformation process has its challenges, but it is easy to fall in love with big, shiny, tech-related buzzwords. And many investors are fooled by it. But the truth to the matter is that management needs to deal with an increasingly younger, digital native, mobile-first demographic: they are their employees, their customers, their consumers. They can make or break a brand in a tweet. Which is why pretending to be digital is a risky business.
A good starting point with digital transformation is to focus on the customer while forgetting the “digital” nature of the notion: in simple words, leave the technology choices for when the organization has a strong understanding of the consumer or customer. In addition to that, your organization should also move beyond certain false positives of digital transformation: those are generally accepted attitudes, beliefs or statements, that create a false reassurance that the company is on a leading digital path, when, in facts, it is not. Among my preferred false positives:
- The wisdom of the – big – crowd. I am a big fan of co-creation and crowdsourcing because I am fond of consumer research. As a 20 year user of consumer research, I saw many instances in which consumer research data was misused to support a decision which was unrelated. Consumer research relies on modelling the reality to answer a business question. If the research is not designed to probe a specific question, unfortunately, its data can still be appropriated to build other truths, beyond the scope of the original model. And the bigger the size of the sample, the bigger its derivative force supporting unrelated facts. While this is an aberration of the way we use consumer research – not of consumer research itself – both co-creation and crowd-sourcing are often suffering from the same problem: exploited to support unrelated decisions. In addition to that, co-creation and crowd-sourcing should almost never be taken at face value: they represent a critical step in any development process. Sometimes their value lays in – and its limited to – inspiring internal resources to action, and providing a new insight platform to work with. Less often they provide market-ready solutions. Almost never they provide support for selling a strategy.
- Consumers want an omnichannel experience. Consumers desire self-discovery cognitive journeys, made of experiences. And they want these experiences to be digitally enabled, and seamlessly cross-platform. Converting or duplicating a poor physical channel experience into a digital one is not a consumer desire. In our Future of Retail report, we explore examples of pure on-line brands creating their brick-and-mortar spaces: they do so, to complement their digital journey through physical clues – senses, like touch and smell, which have no digital equivalent – and, less obviously, one-to-one staff interaction.
- Harnessing the power of Social Media through advertising. There is nothing wrong with using social media to promote a brand, a new product or a new initiative. But the power of large social followers is truly harnessed when we listen to them, rather than broadcasting to them. They are an incredibly rich source of inspiration, and they provide evidence for up-and-coming trends, future and current expectations, early failure spotting and understanding. If we don’t listen, we do not see the change happening.
- Start with the Data. Having a big data strategy is useless if you can’t use the data in a meaningful way. I have been in Poland for 6 years, and I have been buying the same brand of coffee since I arrived. Whether I buy it online, or in-store, the company has recorded in detail all of the product combinations, flavours, accessories I have ever purchased. They also have a record of all the promotions I have used (NB basically none of them because they are not interesting!). They know which coffee machine I own, how big is my household, and they have my comments, complaints and remarks on their social media pages. Nevertheless, with all this information, they still have no clue of what I like and what I do not like. Of what purchasing stimuli and promotional materials working with me. This is because they “have big data”, and they have no clue how to use it. Just recently Nike started testing a new outlet concept, called Nike Live, where they used ZIP code-level data, from their customers and social media, to customize the promotional activities and merchandising of the store, to the local neighbour in which the store is located. This approach not only shows that digital can drive brick-and-mortar growth, but also that data can be used in creative ways.
- App first, ecosystem later. The road to failed digital transformation is paved by useless apps, disconnected by ecosystem thinking. With the lowering cost of data and the increasing available space on smartphones, the number of apps consumers install is skyrocketing. But the number of apps consumers tend to use is limited, and quasi-constant. So a temporary failure, or a change in support, might lead to a permanent switch to a competing app. How do we lock-in users? Through an ecosystem. Digital Ecosystems create exit barriers and better experiences. They also add value to physical products. For example, Louis Vuitton Smart Watches come with a number of ecosystem-based apps, following the travel roots of the French luxury brand.
- Will wait for the Accelerator to payoff. I am a big fan of accelerators and incubators because I believe that certain types of innovation can only happen beyond the traditional boundaries of a corporation. But I am also aware of the fact that too much expectation is burdening investments in accelerators and incubators. Companies need to realize they are one – yet important – tool within their innovation portfolio, and they should play a complementary role to other innovation efforts and activities. Accelerators should not be treated as a substitute for internal innovation. And while accelerators increase the likelihood of success of certain initiatives, they do not necessarily have a better probability of success overall. And what if the accelerator is successful and is developing a large disrupting business? Should then the corporate integrate this business inside them, or let the disruptor envelope and transform the corporate? Either scenario can end in a bloodbath if the corporation has no experience innovating.
- We have a Chief Digital Officer. Well done. And he or she is attending the top digital conferences and behaving like a great ambassador for the firm. Yet, he or she is not expected to do much more than that. Budgets are limited, projects are kicked off with a checklist in mind – we are working on AI, Big Data, Augmented Reality – rather than clear, tangible objectives and deliverables (e.g., we are improving our understanding of our own customers through deep learning algorithms). If your company does not have a digital function, nor an IT development function – beyond the helpdesk – then it is likely that very little digital transformation is going to happen. But if your company has a digital department with a Chief Digital Officer, and an IT development department, there is a lot of chances that a lot of digital talks is happening, but very little real change.
- We have a digital strategy. According to McKinsey’s research, digital winners think broadly about whom they collaborate with. And they tend to often collaborate with firms they historically competed with. Digital winners see the opportunities from new channels and lower entry costs in new markets. But they are also aware of threats coming from price transparency and margin pressure. In other words, thinking that there is a digital strategy rather than a strategy, which is digitally enabled, it’s a simple, deadly misstep.
In conclusion, brace for impact if you think your company is going to survive a digital transformation process made of board-satisfying-checklists, digitally-enabled limbos – separated and far away from the core of the company – and short-term thinking. You might as well stop any digital effort and return the money to the investors, already.