A new report from Altimeter explains the six stages that companies go through on their journey to digital transformation.
One of the major talking points for modern CXOs is the concept of "digital transformation" in the enterprise. But, how does an organization achieve digital transformation?
That's exactly what Altimeter Group and its analyst Brian Solis sought to answer with their April 2016 report The Race Against Digital Darwinism: Six Stages of Digital Transformation. Solis said that many conversations around digital transformation are focused on the IT side, and technology does play a big role, but there's a human side of the story and it's driven by the customer experience.
Digital transformation is driven by the digital customer.
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Still, this doesn't answer the question of what digital transformation is. While the definition of digital transformation is fluid, the report said, Altimeter's current definition is as follows:
"The realignment of, or new investment in technology, business models, and processes to drive new value for customers and employees to effectively compete in an ever-changing digital economy."
Most companies begin to see disparate movements happening in areas like chat bots or mobile initiatives, before realizing that they need to work together. However, Solis said, this is not driven by leadership.
"Believe it or not, most digital transformation initiatives, whether it's called it or not—what leads up to it, happen in the absence of leadership," Solis said. "Very few companies have executives who say 'we've got to do this.'"
Instead, digital transformation come from change agents who act as lawyers, cheerleaders, and politicians, as they have to gather evidence, rally everyone together, and convince people to work together. This bubbles up from the middle of the organization before executive sponsorship is needed.
If you think your company is in the middle of a digital transformation, or needs to head in that direction, you'll need a blueprint. Here are the six stages that Altimeter laid out in its report.
1. Business as usual
Organizations that may be risk-averse and working to simply maintain the business are in stage one of six, "Business as usual." Digital may exist somewhere on the roadmap, but it isn't prioritized, and leadership is often resistant to change. These organizations have a roadmap built upon technology, not the customer experience.
Individuals in stage one companies are often left to their own devices to learn and adopt new technologies, but they are reluctant to introduce them to coworkers and leadership because of the risk-averse culture. Customer strategies and processes are siloed and groups aren't collaborating, which is key to true digital transformation.
"The key takeaway for any business leader, whether you're a CIO or CMO, is that, at some point, you'll end up working together anyways," Solis said.
2. Present and active
Companies in stage two are "present and active" with new technology and digital trends. Early adopters may be engaging with and testing new technologies, which may end up becoming pilot programs. The introduction of these disruptive technologies will often be noticed by members of the executive team as well. Despite these pilots and experimentation, the company departments are often still operating independently.
Stage two companies begin to take an interest in the customer experience as well. Tools like social media and CRM help them to more readily engage with customers and other platforms help increase collaboration. Change agents at this stage begin seeking out the proper education to bring colleagues up to par on emerging digital tools.
Deeper collaboration happens at stage three, when change agents begin partnering with early adopters to work together—breaking down silos in the process. Data and analytics begin to affect decision making in most departments, as formalized results bring hard metrics that can be measured against.
As much of this data is customer data, the conversation begins to center on the debate between the digital customer experience and the traditional customer experience. Digital devotees will also begin mapping the digital customer's journey.
"One of the most unaddressed things is also one of the biggest up-and-coming trends, which is changing, which is the whole idea of customer journey mapping—bringing in cross-function groups to essentially understand how it is evolving," Solis said.
At this point, it is necessary to draft a vision for digital transformation and begin seeking a committed executive sponsor. As new tools replace legacy systems, education and training begin to permeate all levels of the business.
At stage four, most departments are aware of the digital transformation efforts and the way they have been mapped out for the organization. Now, the process and plans are becoming more streamlined and strategic. Change agents get a bigger voice to communicate the value of digital transformation and the role of Chief Digital Officer (CDO) of Chief Customer Officer (CCO) often emerges to advocate for digital in the C-suite.
Data and analytics become even more important, with executive leadership taking an interest in how they communicate progress. Roadmaps for technology and digital transformation begin to blend and departments begin to collaborate even more. It is at this stage that digital investments are held accountable for their ROI and more thoroughly vetted.
In stage five, the companies previously separate efforts converge into a more streamlined approach to digital transformation. Analytics begin to improve and streamline operations, and the efforts made to improve the customer experience begin to improve the back-office as well. Change agents often become formal leaders at this point and executive leadership takes a vital role in supporting an agenda for transformation. A governing body is often established to oversee transformation as well.
IT begins to change in stage five, too, forming hybrid teams and expanding its partnership with the teams behind the customer experience. All employees and managers are educated on the company's digital strategy and understand the focus on customer experience. New programs emerge to fill any existing gaps in the company's strategy as well.
6. Innovative and adaptive
Stage six, Solis noted, is not the final stage, it is merely the point where digital transformation and innovation become interwoven in the fabric of a company. An omni-channel system provides a single pane view into customer data and its effect on the organization. New groups and roles begin to form that prioritize digital.
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At this stage, digital transformation is "business as usual." Most, if not all, departments are involved in the customer experience and education and training are continuous. Additionally, HR is constantly identifying talent gaps and hiring to fill them. IT partners to help test new technologies and cloud technologies operate in almost all aspects of the business.
The 3 big takeaways for TechRepublic readers
- Digital transformation is a growing trend in the enterprise. While it does require an investment in new technologies, it also requires a focus on the customer experience.
- According to the Altimeter report, companies can go through six stages as they experience digital transformation. These stages inform the roles people play in the organization, as well as the tech tools they use to get work done.
- Digital transformation is a continual process, and its definition is fluid. Stage six, though the final stage in the report, is not the final evolution of digital transformation.
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