In a recent commentary about the state of digital transformation among ‘old guard’ corporations, Dion Hinchcliffe of Dachis Group came out swinging with this insightful and challenging question: “Why is it that so many traditional companies with an enormous wealth of assets largely fail to transform them for the digital era?”
As a practitioner immersed in the digital industry, I often wonder about this question myself, but usually dismiss it quickly because I’m “too close to the business”, and thus not representative of typical consumers or audience types.
No matter, though – evidence of digital inadequacies are all around us: my billion-dollar-in-assets credit union’s clunky customer service web app drives me mad every time I use it (that is, when I can access it); the publisher’s ecommerce form on its website that won’t let me pay for a new subscription; the Merrill Lynch website that doesn’t work in a Chrome browser due to compatibility issues. Even though it’s 2012, I keep asking myself – should I be ok encountering these kinds of digital 101 problems, or am I over-reacting?
That’s not to say digital business is easy, because it isn’t (and thus the burgeoning ‘digital transformation’ sector). Web technologies are evolving at warp speed; audience behaviors differ dramatically across demographic groups so it’s virtually impossible to keep everyone happy all of the time in the digital medium; and complex business processes are thorny and pricey to evolve. Then there’s digital marketing and social media – you can’t open a newspaper, magazine, or web browser without getting inundated with opinions about how Facebook and LinkedIn are ‘changing everything’.
Through all of this genuine disruption and not-so-infrequent and not-easily-detectable noise factor (Twitter?), many organizations are stepping up to the digital strategy challenge. Maybe not always in a comprehensive, across-the-board manner, but they’re winning far more battles than they’re losing, and reaping rewards on their way to winning the war.
However, digital transformation and innovation have vastly different meanings across industry sectors. For publishers like Hearst, it means getting subscribers to pay for digital content; for universities like Harvard, it’s about “deep digital scholarship”; for retailers like Williams-Sonoma, it’s using digital marketing to strengthen brand awareness and store visits; for old school brick-and-mortar style service companies like Mac-Gray Corporation, it’s redefining industry rules through LaundryView.
As a consultant who works with all kinds of corporations on these very efforts, and as someone who scours the marketplace for digital strategy best practices, I’ve identified the following five as most broadly applicable and relevant.
1. Develop An Understanding of the Scope Involved. In a recent interview with Forbes, PepsiCo’s director of digital and social media describes ‘digital fitness’ as “…not just about marketing; it entails everything from supply chain to package design to legal.” A legitimate corporate digital strategy cuts across product development, marketing and sales, customer service, and operations — and this is a daunting thought.
That’s not to say a digital strategy should or even can be addressed in one massive effort; this type of an approach is rarely an option for an established company with many units, operating across geographies. For context, comparing a companywide digital transformation to a home renovation can be helpful; most are attacked room-by-room, in a phased approach. But end-game considerations must be taken into account along the way — a modern kitchen or bathroom has vastly different plumbing requirements than those built a decade or two ago. A general contractor uses building plans to guide the way; companies use visioning statements and strategy roadmaps to set the high-level direction of a project, and provide navigation for supporting tactical efforts (such as new websites, marketing programs, ecommerce applications, etc.).
2. Anticipate A Bumpy & Non-Linear Path to Success. At a recent event targeted at B2B digital planning, the global director of digital marketing for at CSC – a $15 billion, multinational company — was more direct in his wording around this issue; he advised the audience to “Take risks. Fail fast. Adjust and push ahead.” My translation: digital transformations are fraught with uncertainty, and you need to develop a tolerance for the trial-and-error conditions, or find another job.
Several factors contribute to this environment: web technologies obsolesce in 24-48 months, emerging digital marketing channels are still taking shape and there are no fullproof ‘expert’ advisors to guarantee success (just experienced early adopters), and any project involving multiple functional areas and geographic areas of a big company are inherently problematic and risky (think about the ERP installations during the late 90s and early 00s).
3. Identify & Empower The Right Kind of Talent. Digital business has been treated as a corporate hot potato for much of the last decade – tossed among the IT, marketing, and general management functions. Not necessarily because no one wanted it, but because it didn’t fit neatly into an existing silo. And it still doesn’t, and that’s problematic at the non-startup.
The ideal person to lead a digital transformation initiative needs the following experiences:
• Entrepreneurial pursuits, so s/he doesn’t get overwhelmed by the inevitable setbacks and has some business development experience, which gets him credibility with the sales team and also helps with the missionary sales aspect of the undertaking
• Marketing, in both online AND offline channels, including media buying, and appreciates the power of an integrated (offline + online), multichannel approach
• Information technology, so isn’t easily intimidated by crass software engineers who will be important to the effort, nor pushy software salespeople, or emerging, thorny concepts like ‘big data’
This profile type may not be plentiful in big organizations, where people tend to advance because of their deep expertise in a particular skill, but they do exist. Most high-end talent born in the late 70s or 80s will be digital-savvy, so it’s likely a marketer on the fast track will understand technology well, and vice versa. (It’s not coincidental that the new president of Best Buy Digital is 36 years old.)
Once the right individual is tapped, s/he needs authority, not unlike with any other big undertaking, which in a corporate environment means a respected title (ideally) or at least powerful executive sponsorship. And IT must serve in a supporting, not leading, role in digital transformation, regardless of whether internal or external resources are being tapped for the effort.
4. Consider Organizational Changes to Jumpstart the Effort. In its white paper – “The Rise of the Chief Digital Officer” – executive recruiting firm Russell Reynolds writes:
“The challenges and opportunities for businesses in this digital age are enormous. Companies need to be fleet-footed to keep pace with changing technology and consumer behavior. Business strategies now must be seamlessly interwoven with ever-expanding digital strategies that address not only the web but also mobile, social, local and whatever innovation there may be around the corner. To help meet these challenges, companies are increasingly looking for a Chief Digital Officer (CDO) who can oversee the full range of digital strategies and drive change across the organization.
Traditionally, digital was positioned as part of the marketing function within the business, responsible for driving the organization’s online presence. The last two years have seen the rise of the Chief Digital Officer, a senior executive who sits at the right hand of the CEO and is seen as instrumental to the future of the organization…the CDO needs to be someone who not only has digital acumen but also is a seasoned general manager who can operate within a large-scale business and influence effectively across the organization.”
In practice, the incidence of the CDO role at traditional corporations (i.e., excluding ad agencies and media companies, where CDOs are common but usually tasked with selling digital services to clients) is currently few and far between. It just seems to require too much effort to make happen, and has the potential to create too much conflict with the CMO and CIO offices. And there’s no guarantee of success if the position is created. Just last week, Information Week posited that “IT risks irrelevance in digital marketing revolution”, citing data from IBM’s Global CMO Study to support its point. Digital marketing and big data are on an inevitable collision course, and fallout will be significant.
It’s unlikely a sweeping sea change will be the way this plays out; rather, CDOs will be installed opportunistically in most cases. When Best Buy recently recruited the Starbucks CIO and EVP of the digital ventures unit, Starbucks seized the opportunity to create a new CDO position – which reports to the CEO and sits on the senior leadership team – and it’s probably going to take that kind of opening at many companies for a new seat of power to be established.
5. Prepare for a Long Haul. Some types of digital tactics, such as online advertising or website overhauls, can be accomplished rather quickly – in a matter of a few weeks or couple of months – but meaningful digital transformation takes time, especially at larger organizations with command-and-control style management structures that rely on strict formulas to be successful. Lasting digital marketing efforts, for example, typically rely on ‘content marketing’, which require years to take hold; sophisticated web technologies – even those of the ‘cloud’ variety – take months to implement and a year or more to deliver real value; and even the most nimble and fast-moving companies have trouble managing new product cycles that last less than a year.
Since Global 1000 companies began directing ‘slush fund’ monies (totaling hundreds of millions of dollars) towards digital tactics and R&D about a decade ago, to test the waters and monitor successes and failures, their digital strategies are quite advanced today. Think Walmart, Citigroup, Home Depot, Target, Dell, FedEx and Disney; their digital penetration today is deep and meaningful. As a result, the chasm between digital leaders and the rest of industry (startups not inclusive) is massive – in terms of audience, engagement, conversion, and behavior. Big profits, strong cash positions, and lending power employed strategically pays dividends, and digital has been a focus for these types of companies for many years, and they are realizing the fruits of their labors today in the digital ecosystem.
The so-called ‘other 99%’ are now in a position to learn from leaders’ mistakes and successes, and use their efforts to guide digital transformation initiatives. Development time will be faster than the it was for the trailblazers, and failure rates should be dramatically lower; conversely, digital windfalls will not be as significant, but the alternative to digital transformation is very likely extinction or atrophy.