July 22, 2015

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Are you approaching Digitalization as a Sprint or a Marathon?

The race is on. Across industries and geography, leaders are sprinting to get ahead in the digital era. And yet, what most participants are confusing as the finish line are markers along the way. The fact is that the digital race is a marathon, not a sprint. It requires a new mindset towards strategy – one that accounts for a constant flow of opportunities and threats arising from new sources of value enabled by digital technologies.

In a recent Survey, Gartner found that though CEOs are focused on the new technology, they are still somewhat lagging in their understanding of digital business. Today, as organizations engage in discussions on how to reframe their enterprise around digital, there are more questions than answers.

So where’s the gap? I think, it lies in the approach. Going digital isn’t about making a dash towards a series of scattershot point solutions – for example, creating a web portal where employees or customers can manage their benefits or implementing a social management tool for engaging customers and prospects in social media. The adoption of isolated digital solutions – creating the benefit portal without modifying existing process metrics for time and cost, implementing the front-end social management tool without integrating it with the back-end CRM system – is not only ineffective but potentially counterproductive.

Digital technology needs to be applied strategically across activities and functions. Only by doing this can it make a company more agile or transform customer experience in a way that drives growth and profitability.

This holistic approach to digital transformation has a number of hallmarks:

Think business-down rather than technology-up. To say that business goals should drive technology decisions sounds obvious, but this is all too often forgotten. A costly analytics solution is implemented because it will provide a wealth of heretofore unavailable customer data – but it turns out that the information isn’t of the kind that will generate significant business value. The key to success in a digitalization journey is to first step back and map the ecosystem and thereby understand the value that it can bring to the organization. At FedEx, for instance, the organization conducted extensive interactive interviews with customer-facing employees, package recipients and package shippers to map the user ecosystem surrounding its signature package-delivery service. It then created a digitized information environment that allows customers to follow the journey of their shipment online, exposing data about a package’s environment to customers via an app, allowing them to track the condition of sensitive packages in real time.

Digitalize an entire value chain. Digital capabilities should be integrated into the complete series of activities that are related to, for example, a customer purchase – the creation of new or digitally augmented products or services; the digital promotion of those products and services (directly but also indirectly, at those online "zero moments” that can influence a purchase decision before a seller has even communicated with a buyer); the digital selling of the product or service, through e-commerce, mobile commerce, or social commerce; and the cost-effective servicing of a product through a variety of “phygital” channels or through intelligent service support. Uber, for instance, did not just set up a mobile app to hail a taxi service. It digitalized the entire user ecosystem of drivers, cars and customers in its transformation of the traditional taxi service. From customer purchase to driver engagement to dynamic pricing to customer support, it created a whole new digital experience across the board.

Don’t just engage – monetize. Digital technology has the potential to create a strong and sustained connection between a customer and a product or service. Create a compelling mobile app for customers and you not only strengthen this connection but you extend it, by enabling customers to take a reminder of the product – or in some cases, the product itself – everywhere they go. But engagement for engagement’s sake isn’t enough. You want it to drive incremental revenue.

As a case in point, an international provider of consumer loans, completely disrupted its old business model in its journey of digital transformation but discovered and drew upon new value-generating digital inter-linkages. The result: A 10 time increase in the number of loans in the very first month post launch of its digital platform.

Similarly a retail giant in US is embarking on a digitalization journey which will see it using beacon technology to turn targeted offers into “hyper-targeted offers” through various wireless and digital technologies thus hoping to substantially increase its sales. Another stellar example is from Facebook. In 2010, Facebook’s revenue-per-follower was $3.23 ($2 billion in revenue, 620 million followers). Over the next four years, by making users’ digital experience more engaging but also through a focus on community building and personalized targeting, Facebook saw revenue-per-follower rise to $14.00 ($12.5 billion in revenue, 890 million followers).

Amid the disruption, don’t miss the opportunity for connection. The digital revolution is typically portrayed as a force of disruption if not destruction. And it will indeed disrupt every part of your business – and might in fact completely transform your current business model. But digitalization isn’t about tearing things apart so much as it is about making connections and enabling value-generating collaboration where they didn’t exist before. It’s about uniting what previously was separate and siloed – business and technology, the front office and the back office, Marketing and IT. It changes the business paradigm from functional efficiency to cross-functional effectiveness.

Digitalization is a confluence of new technologies that is all set to carry us to the birth of a new paradigm. It is the one big idea that will profoundly shape business with an endlessly exciting promise of transformation. The only caveat is that we must prepare ourselves to approach it as a well-structured marathon rather than a short distance sprint

Read more about HCL’s Beyond Digital strategy