The COVID-19 pandemic highlighted where industry leaders had invested in a comprehensive digital strategy, and where others strained and cracked under last year’s unprecedented digital acceleration. Interestingly, surveys of business leaders by Isomr/Digital, McKinsey, IBM and others show that the major differentiator wasn’t a willingness or ability to invest in digital technology, but rather how, where and why organizations made that investment.
IBM’s survey of executives in the midst of the pandemic found that 60% had accelerated digital transformation initiatives. 2 out of 3 respondents said the pandemic allowed them to advance transformation initiatives that had previously encountered resistance. Tech-savvy organizations outperformed their peers by 6 percentage points in revenue growth, on average, across the 12 industries where technology acted as a performance differentiator. But the thought-provoking insight from this research was the mix of technologies and their relationship to underlying business and industry strategy that separated high-performing organizations from the pack.
Emergence of the Digital CEO
In general, CEOs understand that digital should be an integral part of their strategy and operations, and most organizations have long embraced some form of digital enablement. But the distinguishing characteristic of high-performing organizations is the extent to which digital technology is an integral component of their strategy, culture and operations. McKinsey points out that in many successful companies this manifests itself in a “digital CEO” rather than digital transformation initiatives that arise out of the IT or Marketing organizations. In these organizations, a singular vision comes from the top down, and it influences every aspect of the business in an interdisciplinary way.
Take digital commerce as just one way this is playing out. Less than a decade ago it was possible to run ecommerce as the best performing store in a network of stores. In 2021 that’s next to impossible. Consumers expect consistent experiences, pricing, products and service, regardless of the channel they’re interacting with. That’s true regardless of the type of consumer or channel – B2B, B2C, B2B2C, products, services, expensive products, inexpensive products. To the business it means one of two things must be true: supply chain, retail, fulfillment, pricing and other parts of the company must be built on a digital foundation: a digital-first, technology-enabled, data-driven mindset and skillset. (This is where a digital CEO driving vision, culture and priorities from the top-down becomes an asset.) Or, the digital organization must develop competencies and operational capabilities that mirror the rest of the business. Why is this so important? Here are a few commerce-related examples:
- Consumers expect to buy online and return to a store.
- Consumers may expect to buy from a retailer and return online.
- Consumers expect a competitive price and enhanced experience when they demonstrate brand loyalty by buying directly from the manufacturer.
- A consumer shops online and finds a product listed as out of stock, but knows the product to be in stock up the street.
- A consumer buys a product and it arrives damaged because it was inadequately packaged. That consumer calls to have the product repaired or replaced, but Customer Care cannot identify the correct parts to replace.
“Being Digital” isn’t a Technical Challenge
As you can see, these aren’t predominately technology challenges. “Being digital” has less to do with the technology itself than it does with the application of that technology to its business context – both in strategy and operations. The challenge is then for manufacturers, distributors and retailers to identify and prioritize digital opportunities, find the right technology partner and execute effectively without losing sight of the business objective along the way.
Isomr/Digital has engineered a turnaround in enterprise digital strategies by leveraging its OPTICS methodology at a variety of businesses, large and small. At its core, OPTICS is a lens through which organizations can prioritize, structure and monitor progress of digital initiatives, and ensure their success through execution.
OPTICS helps Identify, Prioritize and Structure Digital Opportunities
OPTICS stands for operationalized, profitable, time-bound, integrated, consumer-centric and scalable. These 6 axes can be used to ensure that you are focusing on the right digital opportunities, that you are zoomed out enough to see the full picture (with respect to investment, change management and return), and that you keep the initiative focused.
Operationalized
Despite relying on technology at its core, a digital initiative is about people, process and technology – in that order. Technology helps drive automation, analytics and intelligence. Technology delivers scale. But people and process are required for the business to function. Digital initiatives are frequently derailed because the business views them strictly as technology projects.
Digital relies on transparency, and transparency requires that the business be more aware of how data and processes will be used and perceived by a consumer. Digital puts more information at the customer’s fingertips and equips them with the tools to make independent purchasing decisions. But surfacing information to the consumer requires that different parts of the business are aware of how data will be surfaced and used, and how it will impact customer experience. Similarly, putting tools in the hands of the consumer means the business needs processes to support those tools: purchase, fulfillment, back order, split shipments, cross-docking, scheduling service (such as installation, exams or fittings), returns, gift cards, payment terms, credits, and more. It also means that different parts of the business need to agree on the method and extent to which a customer can audit those processes. Think order and invoice tracking.
Imagine if a restaurant’s patrons sat in the middle of the kitchen. Would the kitchen staff behave differently? Would they handle the food more carefully knowing they’re being scrutinized by diners? Would the wait staff be more methodical about how orders were handled?
Additionally, operationalization also means throttling the amount of change being asked of the organization throughout its digital transformation. In other words, implementing a new digital customer experience will forcibly require that different parts of the organization support it by implementing new and different processes. It will also uncover where processes and systems inside the business routinely fail. As one piece of information infrastructure is modernized, it can be tempting to uncover and overhaul other pieces of infrastructure at the same time. Especially as an ecommerce platform is implemented or replaced, it’s tempting to overhaul the order management system, the resource planning and inventory systems (ERP), the product information management system (PIM), or customer (CRM) systems. While focusing on one area at a time creates throw-away work (integrating with the ERP system now will just get scrapped when the ERP system is replaced next year), it’s crucial that the business ruthlessly contain scope such that the organization can manage through change, and so that the business case can deliver on its originally projected return.
Operationalization refers to the business’ ability to support new processes and data transparency introduced by this new transformation. It also means knowing how much change the organization can handle at one time without compromising customer experience.
Profitable
The marketing technology landscape is littered with technology vendors. At last count, Chief Martech had counted and categorized more than 8,000 vendors vying for a business leader’s attention and budget. Each of those vendors bends over backwards to convince a decision maker that its product addresses the business’ most critical and pressing need. The challenge then becomes clearing the fog and identifying which of these “critical and pressing” problems represents the most value, and the most immediate, attainable opportunity to the business.
The business case for any digital marketing technology initiative should start with revenue. Spend the time to define how implementing this technology solution will improve the financial outlook of the organization. (And by “financial outlook” we mean target and “increase revenue.”) While it’s tempting to look at how much software will save the organization through increased efficiency and decreased error rates, these metrics are difficult to track reliably and are almost never revisited post-implementation. They are also the hallmark of a decision maker who is checking boxes after the decision has already been made.
Focusing on financial performance metrics keeps the project aligned with the business in the macro. They can be easily tracked cross-functionally by the business over time. And, they come with support and accountability at the highest levels of the business.
Time-bound
In traditional project management, three variables can change on a project: time, resources and scope. On a digital marketing technology project, companies often sacrifice timelines at the altar of perfection. But that is the exact opposite of what they should be doing.
Continued support of a digital transformation initiative is dependent on its ability to demonstrate a virtuous cycle of learning, application and growth. As previously discussed, the executive team is best positioned to drive a digital vision and culture from the top down, paving the way for cross-functional operationalization and ensuring digital is deeply integrated with go-to-market strategy. But executive leadership needs to see the digital team calling its next plays, and gaining yardage with each down. Allowing the timeline to drift unchecked between delivery milestones runs the risk of losing the attention of the initiative’s executive sponsors. And once the project loses its executive sponsorship, it will struggle to survive.
Instead of adjusting the date to accommodate scope, set the release date first. Adjust scope and resources to allow the business to take one step at a time. Gain yardage with each down – insisting that projects identify and deliver on value, continuously taking new capabilities to market.
Integrated
Integrated means two different things to digital leaders: systems integration and strategy integration. They’re equally important.
Systems Integration
Most of us think of integration in terms of digital technology and operations. This is systems integration (“systems” refers to both software and people). Integrated systems work seamlessly with one another, relying on process and automation to drive the business forward. Integration can deliver scale, reduce errors and eliminate exceptions handled on an ad hoc basis. In Isomr/Digital executive interviews, CEOs and CDOs offer three consistent pieces of advice when it comes to systems integration:
- Systems should be loosely coupled
While automating the handoff between two different systems has a number of benefits, organizations should be avoid systems being too tightly coupled. Tightly coupled systems exhibit two classic symptoms: coupling and codependence. Coupling refers to when a change cannot be made to one system without making a change to the systems that are connected to it. This also applies to testing wherein reliable end-to-end testing cannot be conducted without testing both systems. When this happens, in reality you don’t have 2 interoperable systems, you have 1 system.Codependence means that one system can’t function properly (or at all) without the other. If one system goes down, they all go down. It also means that one system can’t be replaced without destabilizing the other system.
Remember that we are referring to both organizational process and software. Ensuring loose coupling between systems allows them to adapt flexibly without rippling costly and time-consuming change throughout the organization. It also means that a destabilizing event (software becoming unavailable or unstable, employee turnover causing disruption in process and knowledge transfer) doesn’t unleash chaos on the organization or its customers.
- Take one step at a time and make sure the business case is solid
While automated integrations are frequently one aspect of the desired end-state, they are rarely a hard and fast requirement. Automation should never stand in the way of the organization taking a step forward in its transformation. Not only should the digital team consider alternate ways of integrating (uploading a daily flat file versus real-time integration via API), but it’s also worth putting pencil to paper and calculating the time horizon on which this automation will be more cost effective than its manual counterpart. Sure, automation is sexy. But, your toddler could be taking the keys to your Camry and dating long-haired, tattooed bass players named Thor before you start to recoup its cost. That doesn’t just apply to bespoke software integrations – it also applies to the cost of licensing off the shelf software for ETL and data distribution. - Keep building on a vision to yield scale
“Take one step at a time” is not another way of saying “don’t take any steps at all,” or “integration isn’t worth doing.” Sometimes it makes sense for a business to automate the interaction between two systems from the outset. And, each new integration reduces the opportunity for error and allows the business to function at scale by speeding up data delivery.Formulate a vision for an integrated infrastructure of the future, and keep taking practical steps towards that vision: steps that can demonstrate quantifiable, short- to mid-term returns.
Strategy Integration
For all this talk of system integration, it’s equally important to ensure a digital initiative is well integrated into the business’ market strategy. How well does this system and the stated outcome in its business case align to the strategy of the business as a whole?
Take an example of a mid-market B2B distributor, launching digital commerce tools for its established B2B customer base. Just because the focus is on digital doesn’t mean the organization’s sales strategy isn’t still built on personal relationships. Rather, the digital toolkit must continuously reinforce the business’ relationships that give it competitive advantage. Just because customers can shop for products at 2 AM and route purchases through digital workflows doesn’t mean having the trust and confidence in an experienced and knowledgable salesperson is unimportant. Quite the contrary. By applying an OPTICS lens to digital commerce, this distributor chose to associate a human face to a transaction, and offer a personal interaction whenever it built confidence in the consumer.
The account representative’s email, telephone number and chatbot were made available to the customer when they log in. When they have questions about whether a particular polishing pad and cleaner will etch marble floors, they can slide seamlessly from a digital interaction to a personalized one. The digital commerce experience alerts the sales representative when trouble (such as damage or returns) happens on an account, allowing them to step in and rectify the situation. It queues the sales representative to follow-up on new product sales to know how the item worked out and whether or not they are interested in any related products. This distributor integrated the digital commerce experience into their strategy by making it an extension of their personal relationships.
Many organizations – especially CPG manufacturers – are asking themselves whether or not a direct-to-consumer experience is a nonstarter in this post-pandemic environment. The real question isn’t whether or not direct-to-consumer sales is right for the organization. But rather, seen through an OPTICS lens, how does a direct-to-consumer transaction fit into a consumer’s relationship with the brand?
Siggelkow and Terwiesch offer a handful of great examples of integrated strategy and suggest identify 4 pathways–respond-to-desire, curated offerings, coaching behavior, and automatic execution–for transforming episodic interactions with consumers into ongoing, continuous and profitable relationships. Their examples are a perfect example of the overlap of strategic integration and customer centricity.
Consumer-centric
Customer centricity has come a long way in 10 years. But even in 2021 too many organizations confuse customer centricity with good customer service. As Peter Fader points out in Customer Centricity, customer-centric strategies seek to “identify your most valuable customers–and then do everything in your power to make as much money from them as possible and to find more customers like them.” It’s not just about serving the customer, but about serving the right customer.
Any strategy that puts the customer first requires that the organization express some degree of empathy for their customer: to understand their problems and their passions, to meet them where they are, and to deliver the right solutions at the right time. But customer centricity is about more than that – customer-centricity “aligns a company’s products and services with the wants and needs of its most valuable customers.” (Fader) That requires that the organization and its digital systems to be deployed in service of those first-class customers, and more importantly – that the purpose of those systems is as much (or more) for listening and learning about those customers as they are for broadcasting a message.
Many organizations are guilty of constructing an efficient (sometimes digital) machine for talking at their consumer. The spoken or unspoken goal behind their marketing technology stack is to reach more people with the same message. To cast a wider net. To be louder. But today’s “marketing” is both the “process for creating, communicating, delivering, and exchanging offerings” as defined by the AMA, and dynamically engaging in dialog with the company’s best customers by any available means such that the business understands what customers want. What motivates them. What they need.
In many ways, operationalization and customer centricity are at the heart of OPTICS methodology. That’s because the digital marketing technology stack should listen, adapt and respond to the consumer. And the organization as a whole needs to be willing to change its organizational design to focus on this long-term delivery process and put it into practice.
Scalable
Scale is perhaps the easiest aspect of OPTICS for leaders to understand because a key benefit (perhaps the key benefit) to any core technology is scale. My 4 year-old daughter can operate her lemonade stand, focus on activities that make her profitable (get Dad to dress up in an Olaf costume and wander around in traffic with a sandwich board), fix her delivery schedule (up and running by 2, closed by 3), in an integrated way without every touching a stitch of technology. But technology has the ability to deliver scale. And digital marketing technology has the ability to engage customers at scale.
And yet, more than 67% of CEOs and CMOs stated in Isomr/Digital interviews that many of the software solutions that promised to deliver organizational integration and scale had fallen far short of that vision. Software platforms that were ushered in under the banner of efficiency and scale had failed to realize that vision after 3 years. A study by Everest Group found that 73 percent of enterprises failed to provide any business value whatsoever from their digital transformation efforts, and 78 percent failed to meet their business objectives.
There could be a hundred reasons why businesses fail to achieve the scale promised in their business case. Here are four of the most common and damaging:
- Lack of cross-functional engagement and commitment; Loss of executive sponsorship
As we discussed earlier, identifying and executing on digital opportunities can have the most impact when driven from the top-down by a digital CEO. But an integrated digital strategy requires sweeping change from the organization. This means that for the initiative to reach its greatest potential, the company’s leadership must remain supportive and engaged for the long haul. - Attempts to boil the ocean
As the business starts to mature digitally in one area of the organization, it becomes clear that other parts of the business are behind. It’s tempting to step in and be a savior for these parts of the enterprise. Replacing other infrastructure at the same time starts to look like a good idea. Resist that urge for three reasons. First, the added scope will prolong the timeline on which you can expect to reap the fruits of your labor. Second, each change sends operational and organizational ripples out through the organization. Digital muscle is built by adding a little weight at a time, not by attempting to bench 400 pounds on day one. Third, you begin to ask singular components of your infrastructure to serve too many different parts of the business. The lack of operational cohesion will make it difficult to support and change in the future.Take one small step at a time. Prioritize one incremental improvement. Demonstrate success and take your next step.
- Moving the goalposts; Obfuscating accountability
Often as a digital team winds its way through a digital initiative, roadblocks, risks and organizational challenges appear. Strong leadership requires that these roadblocks are identified and eliminated early in the process. Risks need to be mitigated in a way that inspire confidence in cross-functional leadership. Organizational challenges need to be addressed by the executive team. But, all too often instead of addressing these blockers, the organization essentially rewrites the business case: we don’t have to let customer buy directly online, we don’t need to give other departments access to this system, it’s okay if customers can’t interact with customer care in real time, and so on. The performance metrics change from meeting to meeting so as to avoid accountability, and they bear little relation to the original stated business outcome. Bit by bit the digital vision erodes and with it the projected reach of a transformation.
OPTICS can be an extremely effective tool for evaluating digital opportunities, constructing a business case for digital transformation, prioritizing these opportunities, and executing in a way that holds the business accountable to its stated objective.
