Notes On Digital Transformation: The Customer

According to the late Peter Drucker, as he wrote in his book The Daily Drucker, there is one valid definition of business purpose, which is to create customer.

He explains this more by emphasizing that “it is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or for a service, converts economic resources into wealth, things into good.”

However, historically businesses focused more on selling rather than on customer. Even their marketing efforts were more about attracting more eyeballs, clicks, views, and feet through the door with minimum attention to who is actually looking, clicking, walking into the store, and most importantly buying. We have encountered many businesses that were generating millions in revenues and millions of transactions but with no clue about who they were selling to and without any way to know if those transactions were generated by one customer or a million customers.

With today’s very competitive landscape, very demanding customers, and the spread of technology, it is more imperative to focus on the customer and to identify who that customer is. You probably heard all the buzz words about businesses trying to be Customer Centric, Omni-Channel, 360 degree view of customer, Customer Experience, etc. and unfortunately, yet once again, the focus has been on IT systems with over hyped expectations.


Creating the Customer from Customer Data

If the purpose of a business is to create a customer then it comes without saying that the foundation, for any solution that the business can build on, is customer data. So as a result the starting point for digital transformation should be customer data, not the CRM or marketing system or the E-commerce platform or robots.

Now it is important to highlight that the online business is to a certain extent ahead of the brick-and-mortar one because it is easy to collect customer data online than it is offline, for two simple reasons: delivery and payments. Customers shopping online must provide some personal details to receive the goods and to pay, a requirement that does not exist in the brick-and-mortar world. In other words, online customers are easy to track while offline ones can be totally anonymous.

This is why most of the advancements related to customer data collection and analysis is actually for the online world. That is not to say that no data is being collected offline but that effort is dwarfed compared to the capabilities that exist online. Also this created another challenge for businesses, which is the huge gap between online and offline and the ability to bridge that gap. The same customers shop online and offline, one of the challenges that businesses face today is how to connect the two and create a seamless journey for the customer.

If you are thinking that online shopping is the dominant one then why worry about off-line customers then it is important to highlight the fact that, according to stats published on Digital Commerce 360, e-commerce in the US accounts for 16% of total retail purchases after factoring out the sale of items not normally purchased online, such as fuel, automobiles and sales in restaurants. That is in the US, while in many parts of the world that number is still in the single digits realm. What we have seen in the past few years is a blending of the channels and a realization from retailers that to properly compete they need to have a presence everywhere, online and off.

Even with the COVID-19 crisis, which eventually will subside, and where a lot of retailers are now scrambling to establish or ramp-up their e-commerce presence, that number is forecasted to jump to the mid twenty and it is yet to be seen if it is a long term up-tick or a temporary one.

This brings us back to the concept of customer data, which for the most part still lives in silos, out of date, and in a lot of cases hard to reach. Customer data by nature is system agnostic, my name does not change if it was captured online or offline, on a piece of paper or on social media. As a result, the customer data system, if we want to call it that, should not care about where the data is coming from, as it will be coming from different channels that are known today and many more that will be created in the future. Its sole purpose is to store, unify, and organize the customer data in a way that can be used for “marketing” purposes, pure and simple.

A business should not only focus on building a proper structure to store and organize data today but also one that is scalable and flexible to accommodate new trends in the future. WhatsApp, Facebook, Instagram, Pinterest, and SnapChat did not exist a 15 years ago and now businesses, online and offline, are struggling to accommodate the influx of data that is flowing about customers from social media.

The mistake that businesses make is they look at customer data as part of a product while it is completely independent of any product and/or vendor. Customer data structure should be completely independent and should be able to accept data from any product or channel as long as it adheres to the structure designed to meet the specific needs of the business.

Once the proper structure, for data to be collected and organized, is established then the business has the flexibility to leverage the unique advantages of different systems to collect different pieces of customer data. On top of that, the business would have a bigger flexibility of leveraging different marketing and customer engagement systems to serve its needs because they have the data that they can feed into those system to engage with their customers properly.

If the primary goal of a business is to create a customer then it goes without saying that the first thing the business needs to do is to know what kind of customer they have and that can only be done by properly planning to collect and organize the “right” customer data that is “relevant” to your business.


Customer data creates opportunities and optimizes your marketing efforts

The power of data is that it allows businesses to have visibility about potential opportunities, ideas, and ways to optimize their spend. For example, businesses can send smaller marketing campaigns to a specific target with relevant content, which would reduce marketing cost while increasing revenues. Data becomes more critical on social media as you want to make sure not to target your own customers when you are looking for new ones.

Data creates opportunities as it reveals trends and sometimes a segment of customers that your marketing team never thought about. This would would enable the business to create different engagement campaigns to maximize the revenues from the newly identified segments.

Data is like the fuel that the business needs to operate whatever customer experience systems they get. The cleaner the fuel the better those systems would operate but without it, no matter how sophisticated the technology is, you will only achieve a fraction of what you should.

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Notes On Digital Transformation: An Introduction

Throughout the many meetings and conversations we have had with different organizations about their digital transformation efforts, the conversations were mostly dominated by what technology or systems the business should use. As a result of that focus on the technology as the ultimate cure, we have seen many organizations fail to even kickstart their digital transformation journey. If digital transformation was only about technology and systems then it would probably be called Systems Upgrades, which is what organizations have done for decades.

So what is Digital Transformation about?

If you search the web for Digital Transformation you will no doubt find, what may seem, many definitions from different sources, but if you take a closer look at them then you will find a common thread. Here’s one from The Enterprisers Project:

“Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers. It’s also a cultural change that requires organizations to continually challenge the status quo, experiment, and get comfortable with failure.”

Here’s a more elaborate one from a Harvard Business Review article, “Why So Many High-Profile Digital Transformations Fail”, by Thomas H Davenport and George Westerman :

“..digital is not just a thing that you can you can buy and plug into the organization. It is multi-faceted and diffuse, and doesn’t just involve technology. Digital transformation is an ongoing process of changing the way you do business. It requires foundational investments in skills, projects, infrastructure, and, often, in cleaning up IT systems. It requires mixing people, machines, and business processes, with all of the messiness that entails.”

So we can establish a few foundational aspects of what digital transformation is:

1- It is a mix of people, technology, and business processes

2- It is not a project, it is an “ongoing process” of challenging the status quo and changing the way you do business

3- It is messy and requires certain tolerance for risks and failures

For a digital transformation journey to be proper and survive, it needs to be sponsored from the top by the different divisions heads. Unfortunately what happens most of the time is that it gets “assigned” to IT where it becomes an “IT project” instead of a business initiative.


Why is it that a lot of businesses focus mainly on technology?

Digital transformation usually falls within the realm of IT so naturally the IT team would focus on technology and systems with minimum to no consideration to business processes and internal culture. Also, technology lies at the heart of digital transformation and, from experience, it gets all the attention because it is the “cool” part of the journey and, at least on the surface, it looks easy to implement. In other words, a lot of businesses simply follow the buzz words that are trending at the moment as they don’t want to be seen behind on current trends.

That is why you see a lot of communication from businesses about what new cool technology they implemented and all the publicity they are getting. What you don’t hear is whether they actually improved their internal processes to match the new technology or more importantly whether they elevated their staff to match the technology. It is very easy to identify those gaps and all one has to do is walk into one of the stores and ask the staff about that new AI system they just implemented or the new virtual assistant that is getting all the buzz and how you, the customer, would benefit from all that, and what you would probably get is a puzzled look and an embarrassed staff.

Technology is the “cool” part of the digital transformation journey because, for the most part, it is what the outside world see (especially customers) and talk about. It is all around us from the cool world of AI, robotics, automation, machine learning, product recommendation, blockchain, virtual reality, virtual concierge etc. Customers do not talk about the culture or the processes of the businesses they interact with, those are only mentioned in business articles and academia. However, what customers “do” remember and talk about the most is the customer service and this is what a lot of businesses tend to forget and when the promised sales numbers do not materialize the first thing to be blamed is the system and IT along with it.

On the surface, technology looks easy to implement as the organization can simply turn to the company that provides the technology and rely on them for implementation with the help of consultants. However, changing the internal culture and processes can only be done from within and it is a painful endeavor. I mentioned that on the surface, technology is the easiest part of the digital transformation because that is only an illusion and sooner or later the organization will realize that digital is not a thing that you can plug into the organization and expect magic to happen. Most organizations avoid dealing with the messiness that comes with mixing technology, people, and processes and would rather focus on the technology as in the end they can simply blame the system for not taking them to the promised land.


Legacy systems bring with them legacy processes and legacy people

You cannot transform one and leave the others behind. Time and time again, we see organizations charging one team of “transforming” the business by enforcing systems and technologies on everyone within the organization and without any proper understanding of the existing business challenges and without involving the people who are supposedly expected to not only adopt the new technology but also ensure its success.

Transformation is not a sudden thing, it is not a one time project that you can assign to a team with an end date. Transformation is gradual and continual but that doesn’t mean businesses have to wait a long time to start reaping the benefits of digital transformation. By aligning everyone on what digital transformation means to the organization, by empowering the separate divisions to identify the best ways for them to embark on that journey while meeting the overall objective of the organization, and then by breaking down that journey into measurable and realistic tracks that people can learn from and adjust to, then each one of of those tracks can deliver immediate results.

This allows the organization to be cost efficient because it invests incrementally in steps rather than throwing one big investment into everything and hope for the best, it gives them room to adjust as there will be failures and learnings, and most importantly it allows their people to evolve.


The urgency of digital transformation in the era of COVID-19

It is more critical for businesses now to adopt this agile approach towards digital transformation as the COVID-19 epidemic is forcing them to accelerate their digital transformation journey which might look like a good idea at the start but if not executed properly they might find themselves in a lot worse situation from when they started. We are already seeing many businesses rushing to setup E-Commerce without the proper understanding of what it takes to do that (it is not only about selling products online) and without the proper execution. It is understandable that businesses would want to expand their sales channels but it is also important that in these tough times, the business is not wasting precious money, time, and resources on something that might not deliver the expected results.

As a business you need to:

  1. Define your challenges and objectives
  2. Prioritize your needs and the needs of your customers
  3. Identify what you need to overcome those challenges and achieve your objectives (maybe what you have can help you achieve that with minor modification)
  4. Most importantly involve your staff as you will need their commitment and ideas to get to where you want to be

Like everything else in life, a solid foundation is a recipe for success in the future. No matter what the next emerging technology is, with the right foundation that is designed and built to connect to those modern technologies, organizations would be on the right path for a successful digital transformation.

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