Emerging tech such as AI, IoT, Cloud, Blockchain and Robotics often serve as buzzwords for conversations around working smarter, and delivering ever-faster and better experiences to millions of customers globally. However, IT capabilities and the rapidly expanding strategic vision of work as we know it are not limited to FTSE and Fortune 500 companies.
In much the same way that the first iPhone marked a radical upgrade from the Commodore 128, the new age of technology will dramatically surpass everything that preceded it. Digital transformation will be core to the New Normal, Building Back Better and overall improvements to how we work and live.
Templeton’s IT recruitment specialists explore how some of the world’s leading companies have delivered successful business transformation projects through digital teams and resources.
What Does Digital Transformation Really Mean?
Salesforce’s definition includes the integration of digital technology into all areas of an organisation, using technologies to deliver new and modify existing processes, ways of working, culture and products and services. Digitisation means effectively reimagining and recreating a company, fundamentally changing operations, output and employee experience with positive results for all involved.
Benefits of Digital Transformation
Why is digital transformation important for business success?
- Customer Experience – Easier user journeys, greater access and consistent brand and product experiences provide a competitive edge and significantly improve customer satisfaction. 77% of business leaders believe that digitisation drives customer acquisition, and 63% report that it enhances brand image in the minds of consumers, in turn contributing to growth in customer loyalty, sales and business growth.
- Talent Acquisition – Organisations that are digitally connected with their candidate pipelines, extend their reach across online channels and present a future-focused employer brand have a head start when launching recruitment campaigns, particularly with Gen Z and Millennial audiences, who will soon make up the majority of the workforce. Deloitte reports that 71% of digitally mature companies say they can attract new talent based on their use of data, compared to 10% of early-stage digital companies.
- Meeting Compliance & Regulatory Targets – Digital connection and insights support companies in upholding industry compliance standards and responding to new government policies as and when they are announced. The European Commission’s Digital Compass initiative has promised digital transformation for all 27 EU member states in the next 10 years. The EC has set ambitious targets to get businesses across Europe digitally connected, including: 75% of EU companies must use Cloud/AI/Big Data; more than 90% of SMEs must reach at least a basic level of digital intensity; public sectors must deliver e-health technology that makes 100% of medical records available online; and 80% of European citizens must be using digital ID by 2030.
- Efficiencies – In addition to improving product and service quality and delivery, businesses enjoy greater operational efficiencies and faster time to market, making for engaged, productive employees and satisfied stakeholders.
- Cost Reduction – Savings are delivered from operational efficiencies, automation, and reduction in necessary headcount for administrative and repetitive tasks. The insights delivered from Artificial Intelligence (AI), Machine Learning (ML), data and predictive analytics can prove revelatory regarding areas where businesses can streamline and others where investment is most valuable.
Some business reasons for transformation include new market pressures, cost reduction and risk mitigation. From the technical side, modernization of legacy infrastructure or new technical expertise and workforce demand may drive these initiatives.
Although IT leaders and non-technical executives are increasingly realising the value of digital capabilities, this recognition is slow to translate to meaningful action. Whilst 70% of companies either have a digital transformation strategy in place or are planning to digitise, only 7% of organisations have fully implemented their transformations. Companies that are prioritising technological investment and speedy implementation will gain short-term and long-term competitive advantage.
5 Steps to a Successful Digital Transformation Strategy by World Leading Brands
Start with the End – Goal-Oriented Approach
The purpose of tech transformation has changed significantly following Covid-19. Rather than simply cutting costs or improving product quality, 72% of leaders say post-pandemic that creating new business models through digital transformation is one of their highest priorities.
Every success starts with a plan. Focus first on the business model: how will digitisation fundamentally change not only your operations and your products, but the way you offer them to your customers, the relationship you have with customers and stakeholders, and the way you derive revenue? Work backwards from your ideal outcomes to determine the tools, techniques and people you need to get to the end goal.
Establish a core but small team of key leaders and experts across departments, and discuss the following questions:
- What exactly do you want to achieve from the transformation?
- What will this achievement look like?
- How will you measure this achievement and progress against your goals?
- Who are the critical stakeholders at each stage across departments?
- What problems and challenges will you face along the way, and what initiatives can you put in place to recognise, report on and resolve issues?
- What can you learn from previous changes and initiatives that can serve to anticipate and address customer and employee pain points?
- Why have previous successful transformations achieved their goals, who was involved in this success, and how can they help champion your current project?
- How far away are you from your ideal outcome – which of your current systems and processes will be necessary and useful, which will require an upgrade and which will need to be replaced?
The tech stack you employ is a means rather than an end. Incorporate your learnings into the plan from the very beginning – build your transformation around your desired outcomes, rather than the technology available.
When you have a vision and a plan in place, assess your current technologies. Map all your legacy systems and determine which are crucial to delivering your vision and transformation plan, and which are best removed or replaced. Using what already works and removing systems of little business value will shorten your project journey timeframe and get you closer to achieving your goals.
Case Study: Microsoft.
Whilst most global household name brands would balk at such a risk as killing off entire business models, new CEO Satya Nadella saw that Microsoft needed to get rid of what wasn’t working before the company could focus on new innovation. The software and electronics giant was suffering worrying losses from static products and was struggling to compete with Google, who offered a free operating system. Nadella saw that the 1975-founded company needed to replace focus on an outdated business model with a new model that fully embraced 21st century customer needs.
Nadella saw mobility as the transformation’s end goal and the cloud as the underpinning strategy. Nadella started to give Windows away for free, providing immediate customer relationships and adding high value for little to no customer investment, and dropped the Nokia phone from its product strategy. Rather than simply meaning ‘a mobile phone’, Microsoft’s vision reimagined mobility as the mobility of human experiences. Instead of just copying and trying to best competitor products, Microsoft freed their IT team’s focus to deliver unlimited innovation around customers and their experiences, with the goal of connecting and empowering people everywhere serving as their most important business objective.
Transforming the business model with a radical new look at company purpose and ideal goals delivered Microsoft with a $1.5trillion gain in market capitalisation.
Organisational Strategy – Detailed, Actionable, Measurable and Repeatable Processes
All CIOs and CTOs are familiar with project management tools, but many will not have yet incorporated these into the core business strategy and converted all departments to a unified method of management. Visual project methods such as Kanban can be easier for non-tech leaders and teams to understand, by providing easily accessible information that can be drip-fed through small, incremental updates.
Mapping out stakeholder needs, roles and impacts will build necessary activity and considerations into the digital transformation strategy – and increase likelihood of project delivery and success – from the very beginning. Obtain senior stakeholder buy-in by presenting a strategy that clearly evidences the involvement of their team and the direct benefits (efficiencies, collaboration, reduced workload etc) that will be delivered. When presenting to the Board, determine and communicate ROI in both the short- and long-term. Talk in the language of each non-technical department to help your key stakeholders visualise the digitisation programme and dramatically reduce senior pushback during project implementation by anticipating all objections, challenges and solutions from the very beginning.
Becoming a truly digital company isn’t an end goal in itself: as technology is constantly evolving, and customer needs are continually changing in response to a rapidly changing world, organisations must continually digitally transform. Building a continuous improvement and agile culture involves:
- Organisational Commitment – Aligning the objectives and motivations of employees across levels, functions and teams to ensure the entire company is moving towards the same shared vision and goals
- Routine – Habits can be challenging to make but even more difficult to break. Aligning teams to unified ways of working from the beginning of digitisation will start as you mean to go on, and help teams work in the most effective and efficient way possible
- Measurement – Objective and consistent KPIs will remove subjectivity from decision-making and demonstrate clear progress at every stage of digitisation. AI) and ML can support existing analysis with predictive insights to consider both the past and the future for an agile, flexible approach to digitisation
- Communication – Communicating both quick wins and progress against long-term goals are vital for maintaining momentum, and ensuring consistency in the customer experience from marketing to sales to product support
- Repetition – The above actions must be driven top down from senior leadership to entry level, and must be repeated regularly to identify new challenges and opportunities, and deliver and measure ROI.
Case Study: Hasbro.
In recent years, Hasbro realised that instead of focusing on children, targeting parents – the people who actually make toy purchases, and therefore the true customers – would generate mammoth opportunities. The well-known toy retailer brand leveraged data to better understand its customers and used AI and ML to recommend relevant toys and games to parents. Using data also helped Hasbro create a frictionless customer experience as it better understood consumers and could proactively meet their needs. The strategy aligned all departments across the organisation into one cohesive vision, with data, metrics and reporting at the heart of continuous improvement.
Hasbro is constantly revamping and learning from its digitisation strategy. The company is collating and integrating data from retailers with internal product data in a consistent format that will make supply chain analysis and predictions much easier, faster and more accurate. Metrics and agile tactics are helping Hasbro monitor in-stock performance, generate recommended store orders and better collaborate with retail customers.
The retailer is utilising an Advanced Analytics & Data Science team to change the way the business uses consumer data and insights. Hasbro have used Predictive Analytics to inform their content and digital advertising strategies, most notably through launching their new Hanazuki line on YouTube, which has empowered content creation and distribution that anticipates consumer interests and engagement. In the second quarter of 2021 the company reported revenue growth of 54% up to $1.32billion, with an operating profit increase of 5.8% to $76.6million.
Infrastructure & Ecosystem – Think Outside of the Company Box
Like any major project, digital transformation will require a sound infrastructure that balances security and privacy, whilst proving scalable and flexible enough to grow with your business and market needs. When you have a plan in place for your own transformation, think about the infrastructure underpinning your business and the ecosystem surrounding it, and therefore supporting your transformation. Businesses need not trade innovation for safety: a bespoke cyber security strategy can act as the foundations of connected cloud and Internet of Things (IoT) infrastructure.
Driving security, flexibility and growth can be best achieved with a cloud-first strategy.
In an increasingly globalised environment, products and services are now no longer just physical entities in their own right, but permanently connected to the business that produces them. Cloud connectivity is vital to facilitate constant, unbroken connection between your business and its customers, and customers and their product or service. Cloud computing and IoT facilitate real-time customer feedback, social listening and product performance insights that will bring employees and suppliers closer together to continuously update features and match customer experiences to customer needs. Connected infrastructure and ecosystems empower IT teams with the data, detailed analytics and insights needed to continually improve customer satisfaction and revenue growth.
Map out your ecosystem to identify the suppliers and technologies that will be vital to your transformation, and those with functions that could be better performed and deliver greater value with alternatives. A visual representation of all system and supplier relationships will reveal the value that each tool brings to the new vision, highlighting which tools will need to be integrated, in which specific ways, and any problems or innovations this will create.
Case Study: BP.
Global energy provider BP have been leading the way with their cloud-first strategy since 2016. The company operates in 78 countries and has around 73,000 employees worldwide, and the organisation’s infrastructure and ecosystems have been crucial in pivoting from an international oil company focused on producing resources to an integrated energy company focused on delivering solutions for customers.
Stewart Fry, VP of Enterprise Information Technology and Services for BP, announced BP’s intention to go “all-in” on migrating more than 900 business-critical applications from its European Mega Data Centres to Amazon Web Services. This is in addition to the 32 production environments BP has already migrated to AWS, including its 16 TB strategic global fuels instance. BP also work with AWS to develop employee training programmes, help their tech teams collaborate with their professional services teams, and support technical engineers with upskilling.
Fry revealed of BP’s infrastructure and ecosystem strategy, ‘We knew when we did that, that it was a bold statement. We had to ask ourselves if we really knew what that meant, and the main aim was we wanted to stop adding things onto on-premise infrastructure, and as part of that we decided to exit our mega data centres in Europe, the US and Singapore. We did the economics on this being a key enabler, and that’s where we built on [our cloud first strategy].
Involve Customers Directly and Transform Around Their Needs
The role of data in any transformation is vital. Instead of chasing the latest software or mobile app, start with what you already know, and could know given your current resources and information, to create a change project based on customer, employee and shareholder needs.
The transition to a digital-first organisation starts with the customer experience (CX). The best tech tools and processes will only deliver customer value – and therefore revenue and profit – if they are designed and developed to truly address customer needs.
Conduct extensive research into:
- Customer perception of your products/services and brand
- Exactly how customers are using your products/services
- Customer pain points
- Their wish lists for features and improvements
- The impact of your products/services upon their jobs, goals and lives – the true value they receive from your business.
Globalisation and Industry 4.0 mean customers want, need and expect their experiences with businesses to be fast, responsive, and interactive whilst remaining available and accessible from anywhere at any time. When customers are engaged and prioritised, CX naturally drives digital innovation and adoption: some of the best innovations and business models in history have come from customer feedback, suggestions and ideas.
Case Study – Nike.
One of the world’s top athletics clothing companies used data and insights derived from customer interaction to drive a transformation strategy based on consumer needs. Nike built more powerful data analytics to generate more efficient and effective use of customer data, which produced insights informing an updated e-commerce strategy and created stronger digital marketing campaigns that skyrocketed direct to customer sales.
Better understanding saw Nike deliver on what customers most wanted from their clothing and apparel brand. Nike opened concept stores, created more membership opportunities and improved the customer experience both online and through mobile app use. Learnings from meaningful customer interaction drove optimised searching options, moved inventory across channels and increased digital fulfilment capacity. Nike Rise added concept stores to improve the customer experience and brought Radio Frequency Identification (RFID) capabilities to track customer data in real-time using smart labels, which have already enabled better product allocation and replenishment, and are delivering detailed insights on customer behaviours in stores.
At the end of last year Nike’s quarterly results rose by 9% to $11.2billion, driven by growth across digital business and all geographies, led by a 24% increase in China. Nike aims to create a digital-first supply chain built on strong analytics to optimize cost, sustainability, product quality and customer service. President and CEO John Donahoe explained, ‘We’re not just reaching our consumers, we’re creating dialogue and opportunities for action that continue to exceed our own internal benchmarks.’
Permanent Organisation-Wide Change – Engaging Internal Comms
As tech becomes an increasingly vital part of every business, the value of digital transformation is increasingly understood by customers, user groups and stakeholders. However, CIOs and IT teams must purposefully and regularly evidence transformation value internally, supported by Board and business leaders, to achieve the understanding and engagement of employees.
Employee engagement across locations, remits and teams is core to the success of any change, and particularly so in the case of the permanent organisation-wide change that digitisation brings. McKinsey recently found that companies that took the time and trouble to address employee opinions, concerns and needs were four times more likely to report successful change programmes than those that didn’t. Employees who truly understand the reasons behind and benefits for any organisational change are significantly more invested, more involved and more engaged with delivering a successful change.
Creating an easily understandable vision of the transformation and its goals and disseminating through a bespoke internal comms strategy will create a positive internal perception from the very beginning. Communicating the new vision, regularly reporting on the impact and success of the transformation, and highlighting the role of individuals and departments in this progress will help employees to feel part of the transformation and personally invested in its success. Designating IT support staff to consistently listen to feedback, raise and solve employee and customer problems will retain project momentum and employee buy-in.
Establishing shared KPIs will unite all departments and teams around the common digital transformation goal, and ensure that all employees (technical and not) are working collaboratively rather than in silos. Bring IT teams and department heads together to agree on KPIs, required tools and responsibilities, communication channels and metrics to track progress.
Partner with stakeholders across departments to determine objectives and goals that can be shared across teams, and ensure goals are aligned both with the transformation objectives and with the capabilities of each team. MIT’s Centre for Information Systems Research reports that when organisations prioritise, empower and reward employees throughout organisational change, they can achieve twice the customer satisfaction and innovation and generate 25% higher profits.
Case Study: Target.
For the past few years, global retail giant Target has placed employee engagement at the heart of digital transformation and growth. The company’s leaders reviewed each of Target’s multiple internal communication platforms individually to ensure the business was using the right channels to communicate the right information in the right way. Target prioritised real-time interaction with employees, making sure that all staff were aware of any company changes well before the press, markets and customer groups. Communication was tailored to create short, daily bulletins that included information on Target’s strategic roadmap, transformation, issues and problems that arose as well as successes, alongside fun facts about products, pop culture and positive company news stories to engage staff throughout the transformation.
During the pandemic, Target rapidly advanced its digital transformation by quickly responding to customer and employee needs, reconfiguring digital systems and processes, and enabling home working. Since 2020 the organisation has supported its 1,200 employees with a variety of wellbeing initiatives including webinars to help leaders adapt to virtual working and providing tools to help individuals manage digital change.
In August 2021 Target was recognised as one of the world’s Best Companies to Work For, receiving recognition as a well-led and well managed organisation that demonstrates high levels of employee engagement despite and throughout the Covid-19 pandemic. Matt Davies, HR Director comments, ‘Our people are firmly at the centre of our culture and that’s why we have high engagement and retention. Over recent years we have made a huge amount of progress, developing our people-centric approach.’
The retail giant’s employee engagement initiatives have paid off with astounding revenue and business growth despite the pandemic. In 2020 Target announced a sales increase of a staggering 20%, including $9 billion in sales taken from competitors.
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