How do companies digitally transform themselves to better engage their customers?
In this interview, projekt202 Digital Transformation Officer Kevin Green takes an expert look at the ways companies like Under Armour, IBM and GE are successfully expanding their visions and business capabilities.
Digital transformation is top-of-mind lately for business tech, but some may not fully understand what it is. What’s your definition of digital transformation?
When most organizations talk about digital transformation, they’re really talking about digitization and taking advantage of new tech tools that are available. From my point of view, digital transformation is much bigger than that. It’s taking a visionary approach, looking at how do you improve the overall customer experience and creating a new model for engaging and connecting with current customers and prospects.
The majority of organizations are still in that early digitization phase. If you had a solid vision at the beginning and were talking about how to metamorph the entire organization, you’d realize that these tactical projects, by the time they’re done or completed, are potentially going to be obsolete.
How does an organization think about that big-picture, high-level strategy?
Digital transformation has to be defined by each individual organization. There is no blueprint or rule book to follow. What we see constantly is that grassroots, siloed approach to transformation, which is actually more of digitization or a modernization of processes that every organization currently has.
We need to identify, Where are the places that make sense? Where can we take legacy processes and digitize them to get massive production increases, and drive costs out of the system? All of those things need to be done, but without that visionary approach, you can end up spending too much time or too much money on a project and find out it was a wasted investment.
I think the majority of organizations are taking the hunt-and-peck model: find an opportunity where we can improve and let’s come up with a new approach, and that’s being labeled as a transformation exercise.
Another viable model we’re seeing is this external innovation approach. That can happen either through the development of internal innovation labs or, more commonly, through acquisition. Folks who are taking this additive digital transformation approach are opening up markets and expanding the role that they play in their customers’ lives.
Can you share a corporate example of that approach?
The example I always use in this additive digital transformation model is Under Armour. Under Armour has done a phenomenal job with their apparel, with their brand. They’re well-known. They’re battling Nike. They want to be the top athletic apparel maker in the world. They acquired several fitness and nutrition apps, and spent $750 million to acquire a user base of 130 million application users. It was their first foray into really becoming a digital fitness company.
Certainly, they’ve had their challenges. They’re moving from an apparel model to a technology model, and that requires an entirely new set of skills. I don’t mean more developers, designers or engineers. It’s a marketing shift. It’s a customer engagement shift. It’s a customer service shift. Everything changes. This is an entirely new business.
It’s an $8 billion revenue opportunity for Under Armour. That’s a huge investment, but we can already see them spinning new products out of the intelligence that they’re getting from that community and that user base.
They’re saying, “People who wear our apparel should also interact with our applications. If they interact with our applications, we need to create products like scales, health bands and smart shoes that allow all of that data to come back and better inform customers about their behaviors.” That endears customers to the brand even more. That’s the additive model.
Are there other models?
The third model is visionary digital transformation. The example I always use with this is General Electric. GE moved from an industrial company to a digital company. All their advertising supports this. I hold them up as a best-in-class example, because this isn’t something that they’re just doing on the side. It is fully embraced. It is in all of their messaging. They are a digital company and they want everyone to know it.
Through that process, they shed their appliances division. The visionary transformation model is really about addition through subtraction. They were very smart: “Let’s move some of these things out of the model that don’t align with our vision of where the company is going.” They’ve done a really great job in re-envisioning and re-imagining themselves into this new company. It’s one of the more high-risk approaches. You leave behind legacy business lines, but you recognize what’s coming.
All of the aerospace, lighting and power, and other business units and business lines that they’re in, all of those industries are going more digital. They will continue to sell and service their clients and customers the way they always have, and with the product suite that they have, but they’re going to focus on expanding the depth and breadth in which they serve those customers. You start to understand that, “If we focus here, we can double the value that we provide to these core customers,” versus trying to expand the total customer set.
Are other companies adopting this visionary approach?
Uber would be another great example. Everybody talks about how Uber disrupted everything, but when you listen to the CEO talk about his bet on autonomous vehicles, he says, “I can’t be wrong.” That is visionary transformation. He’s investing heavily in it. He sees his future business model to make more money. He’s going to be able to scale faster. He’s going to provide a better level of service if he can be first-to-market in the autonomous vehicle race.
Those are big bets. They do have to come from the top down. They’re uncomfortable. They’re high-risk.
Going back to GE, think about how long they’ve been in this transition. It’s at least the last decade, but it’s really only been the last two or three years that we’ve started to see this “digital GE” language coming out.
It will be interesting to see how Uber moves, because it’s going to be a very competitive marketplace. They do have somewhat of an advantage over Apple and Amazon and even some of the automotive original equipment manufacturers, because of their existing network and the value that they provide.
How does a digital transformation officer advise a company that hasn’t made that plunge yet?
The challenge is that you can’t just jump into a new market. Nike went heavy with the FuelBand, but there wasn’t an additional value-add to it. There wasn’t an experience. There wasn’t a community. You can make the assumption that, “Nike is a beloved brand. People all over the world will buy Nike just because we’re Nike.” That internal mindset leads people down the wrong path, in terms of thinking, “The brand is strong enough to carry our evolution and expansion deeper into our customers’ lives.”
Under Armour didn’t make the bet on hardware right away. They made the bet on software and a community. They started with the acquisition of these communities, understanding their behaviors, what they were doing, and how they trained. Again, how do I better understand my customers and my opportunity? How do I acquire that information, or build that reputation or trust? Without trust, people won’t buy.
What is the first step? Is it a software play? Is it a customer experience or a digital experience that starts to transform the way you’re perceived? Then, are people open to hardware? What kind of hardware? You can’t be a fast follower in the world of digital transformation, because then you’re competing on cost and it’s a race to the bottom. You’ve got to compete on future set, but also on form factor.
Are there any companies that are doing that really well?
A great example is IBM. IBM historically started as a PC company or Big Blue hardware. Then they moved into software and, over the last 10 years, the launch of Watson. IBM transformed how Watson is integrated across all of their products and solutions. Watson is elevated out of just being this one product and IBM has become a cognitive business.
It’s a great example of somebody who said, “We’ll start with a product, we’ll build a market, we’ll see how people adapt and understand that market, and then we’ll integrate that product and that concept into everything we do.”
Do you agree that there are two different types of strategies, one that’s more organic and one that looks for the hot new tech that can be integrated into the company?
There’s value to either approach. It’s okay to go with either, depending on what your road map dictates. One’s going to get you there faster than the other. With the acquisition or the additive transformation strategy, you’re going to start the path much faster and you’re not starting from zero. There’s very low risk in that, because you’re taking a proven approach. You have to believe that, by adding it into your offer, you can take it further than it can go on its own. That approach makes sense for a lot of organizations to go after whatever the shiny new object is and integrate it.
How do companies benefit by making a giant transformation through a new technology?
Every CEO in the back of his or her mind is saying, “What can I do to expand my market? What can I do to drive more revenue?” With all of the rhetoric about being disrupted, I don’t think most CEOs are overly concerned about being disrupted. Inherent in their nature is the need to find a way to continue to grow the business. That can be done through acquisition or evolution. You’ve got to look at the whole and understand how to connect the dots between what your customers actually do with you now and what they’re doing outside of you.
Do companies genuinely ‘get’ that, as far as what their customers want?
Most businesses have a very narrow view of their customers. If you ask any CMO or CEO how well they know their customers, most are going to tell you that they know their customer inside and out.
I’ll use the Under Armour example again. You go talk to Under Armour, they know their customer. They know what they wear. They know how they work out. They know what inspires them. People are passionate about it. They’ve got that locked down. But what do they know about their customers’ interactions with software? What do they know about their customers’ technology habits and usage?
Instead of looking in your defined window, you have to find a way to look at the five steps that are happening before your prospect becomes a customer and the five things that they’re doing after they’re a customer. The view of the customer journey right now is so narrow and it’s normally tied to a traditional funnel. You have to start looking well in advance, because if you don’t, your competitor will.
The person who starts to expand the field of view, who continues to expand and find the right opportunities to engage earlier, is the one who is going to impact the customer-buying decision at the right point. If you’re only looking at your limited scope, you’re missing a huge opportunity to convert customers through better marketing, better engagement, better messaging, increased product offering and better customer service.
Does data help widen that view of the customer?
With the big data revolution and the focus on big data, you can look at how people use your product. But before you even get there, you must understand the things that drive people, those decision points. That’s the biggest point I try to drive home with folks: You’re focused on getting them to make a decision to buy your product, but somebody else is focused on how to get them to take an action that will result in their need for a product.
CEOs and other business leaders should look at innovations happening around them and where their companies can do it better. That’s a huge opportunity.
So it becomes a cycle of constantly having to innovate and improve?
The real point of digital transformation is it doesn’t end. As new technology comes in that transformation, that evolution will continue to roll on and on and on.
The biggest opportunity for most businesses is to ask, “What kind of transformation are we open to creating and what makes sense for our business? Should we embrace this grassroots, siloed approach, because it’s fast and it’s safe, or do we go with this additive approach where we bring on new people and engage them into the organization?”
The skill sets are going to vary based on whatever you’re absorbing, but most people are leading with technology resources. They’re not the same technology resources that your company currently has. They are not one and the same. They need to work closely together, but they have a very different skill set and should move at very different speeds.
What drives a company’s transformation?
What’s missing from most of these organizations is the strategic oversight. That strategic visionary – whether CEO, CMO, Chief Customer Experience Officer or whatever emerges – has to understand how to pull together resources that are able to execute and build, able to design and conceive, along with that strategic side that’s able to develop or encourage, and then integrate.
If you have an innovation lab that’s coming up with amazing prototypes and they’re launching them into the world, it’s fantastic. Where innovation labs fail is, once they’ve deployed them and they work, they have no idea how to integrate them back into the business. If you can’t implement your innovation, it’s not a wise investment. In an ideal world, you’ve got that mapped out and you understand both sides of the coin.
What’s the key takeaway for successful digital transformation?
Again, going back to that customer journey, open up your aperture, expand your field of view and understand those four steps ahead of where you traditionally look at your customer engagement. That’s a key element to transformation.
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