Podcast transcription

Introduction

For all of you who are embarked on a digital transformation journey, how do you know you are on the right track? Are your digital investments upping your enterprise’s overall digital maturity? How can we assess an organization’s digital maturity?

Hello everyone to another episode of DigiBizCentral podcast on organizational excellence. I am your host Wasim R. In today’s episode, we will attempt to answer these questions. But first, a note about this specific podcast.

The DigiBizCentral podcast on organizational excellence is focused on covering various aspects of today’s digital business particularly on business strategies as well as management methods and practices that drive organizational excellence. We encourage you to subscribe to this podcast to ensure that you are always getting notified on future episodes as they are published. Also, please take a moment to rate us on iTunes or whatever channel you get this delivered on. We highly appreciate your feedback.

In today’s episode, I will introduce a digital maturity framework, which organizations can use to assess their digital transformation maturity more holistically. The underlying idea behind this framework is that as an organization continues its digital transformation journey, it must pay attention to certain elements to ensure that they are addressed in their digital projects and initiatives. Defining a digital transformation roadmap with specific milestones and outcomes along the way can ease the transition and increase the chances of success. Before we get started, please note that I will cover this topic in two parts or episodes. As this is part 1, look for part 2 to be published immediately after this one.

So, let’s get started with Part 1 of this topic.

The world in general and organizations specifically have been going through a digital transformation for a number of years now. Digital transformation does not refer to one or two programs that an organization embarks upon at some point in time. Rather, over the years, most organizations have taken on various digital initiatives triggered by their business imperatives and since then have continued their journey, which continues until today and would for some time to come. Depending on when each organization started, they are at different stages of that journey.

But all this then raises the question that how does an organization know where is it in that journey of transformation and where’s it heading? Specifically, how can an organization know that it’s progressing and maturing as it goes through that journey? For example, does an organization that migrates its business applications to the cloud can be regarded as digitally mature? What about the one that actively uses social media to interact with its customers or the one that has established a blockchain system to manage its transactions?

The answer to that question is that unless those steps have helped your organization become more customer centric or improve on your operational excellence then the answer is no. The market doesn’t reward organizations for moving to the cloud, for example, unless those steps have helped your organization to come closer to your customers and made your organization more agile and nimble to respond to market needs.

The move to digital, therefore, must be more holistic in nature. In this fast paced economy, it’s important to ensure that rather than merely taking on a few digital products and services, an organization becomes digitally mature so it’s firing on all engines for it to be more effective. Band-aid digital solutions in this economy simply don’t work. We saw how GE, despite its numerous digital innovations, suffered serious setbacks due to not paying attention to its bloated internal operations and dropped out of the Dow Jones Industrial Average index after being on it for more than a 100 years. We saw a similar fate of ToysRus, who despite launching major digital initiatives a few yeast ago was recently driven out of business. And there are other numerous examples of organizations, which were driven out of business due to their pursuing one off digital solutions rather than paying attention to all the necessary dimensions to keep them competitive.

As for the digital transformation maturity framework, it has five dimensions and they are:

Innovation
Market alignment
Customer centricity
Operational Excellence
Organizational Culture

It’s important to understand that achieving digital maturity related to these five elements that I just mentioned is not just about launching a project or two. For example, an organization can’t just become innovative by launching one innovation center. Rather maturity along these dimensions and getting these ingrained within the fabric of the enterprise requires establishing systems, methods, and practices that can traverse the entire organization along with retooling and reskilling of the organization’s workforce.

Let’s now cover the five dimensions of this maturity framework in more detail. In this episode, I will present the first three elements and we will continue with the remaining two elements in the next episode.

Innovation

The first dimension necessary to achieve digital transformation maturity is that of innovation. In this fast paced economy where organizations in all industries are facing threats of disruption, no one disagrees on the need to constantly innovate to stay ahead in the competitive game. Innovation today is not about finding random opportunities to innovate a few products and services but instead it’s about changing an organization’s culture to bring innovation at all levels of the organization consistently. To do that, first, it’s important for every organization to define what it means to innovate. Innovation can be defined in multiple ways depending on various perspectives. Within the context of enterprises, we can say that it’s an overall process that identifies and creates new opportunities for the organization. These opportunities may be in the form of creating new products or services, streamlining of operations, making processes leaner, reduction of costs, and so on.

The goal of innovation in organizations is usually to take emerging technologies and prevalent industry trends, and then applying that knowledge in the context of the organization’s current state and develop new products, services, solutions, and even business models and frameworks. The goal usually is to make it easier for customers to engage with the organization, creating new products and services that are more aligned to the market, fixing issues related to operational excellence and so on.

To do so at a larger scale and to make it impactful enough, organizations must have innovative processes and practices at all levels of the organization. From small things such as including the right button on the right spot on a web page to pursuing innovative strategies and creating the most innovative products and services, a culture of innovation must be cultivated at all levels to enable an organization to stay competitive in this marketplace and economy.

And to do all this, i.e. to inculcate innovation throughout the organization, an organization should take formal steps and look at inculcating innovation as an overall process as well as a set of practices that must be introduced organization-wide. Having a formal method or framework can help guide the right processes, structure, and cultural practices across the organization and can help drive innovation at all levels of the organization resulting in new products and services, process improvements, injecting agility in all corners of an organization, etc.

When defining the overall framework or process of innovation, organizations must define it in the context of the various innovation programs that they already have such as R&D labs, CoEs, etc. The process should be defined clearly for all in the organization to see and follow. The better it’s defined, the more the process is likely to yield useful results for the organization.

To ensure that innovation gets its fair share of attention through digital transformation, many organizations can use a maturity model to guide their maturation in this dimension. For example, they may simply start out with a few innovation projects but then may push the concepts across the organization through awareness sessions, launching formal processes, creating new compensation programs to encourage innovation, and so on. This journey of inculcating innovation in the organization’s culture should be tracked and followed up to ensure its successful adoption.

To cite specific examples of innovative practices and steps that organizations can take, we see organizations establish companywide innovation centers, where staff can work on new opportunities and validate their commercial viability. We see for example Samsung establish a strategy and innovation center where it works on new products and services. Amazon has a Cloud Innovation Center where it experiments with new cloud products and services. A number of universities have innovation centers also. ASU, for example, has established a Smart City Cloud Innovation Center (CIC). And the list goes on.

The topic of innovation along with the other dimensions is quite extensive and can’t be fully covered in one episode. As I will cover these in more detail in other episodes, please ensure that you subscribe to this podcast so you are notified of the episodes as they are published.

To summarize what we just discussed here for innovation, an organization should first define innovation more specifically and have a defined framework and process to ensure that its implementation can be tracked. Second, it should consider implementing a formal method to ensure that it’s constantly innovating. The important point is that an organization should not be solely driven by ad hoc innovation practices or projects. Rather, innovation in the digital world requires the organization to espouse a cultural transformation, where all its staff have the mindset of solving problems. A few digitalization projects and initiatives may solve certain problems for an organization but it will introduce others. To tackle the ongoing challenges that will crop up on a nonstop basis and at the speed of the market, it’s important that an organization and its staff have the right mindset and agility to tackle these challenges.

Market alignment

The next dimension to measure an organization’s digital transformation journey’s maturity is that of market alignment. Market alignment may mean a number of things to different people and audiences. However, in the context of digital transformation and digital maturity, I mean it in the sense of ensuring that an organization’s products and services, its message to its audiences, and its overall practices and processes are aligned to the overall market and economy such that the organization is able to not only compete effectively but also deliver the best possible results.

With the change in the business landscape for each business, each organization (depending on the business it’s in obviously) should appropriately keep tabs on various external factors to ensure that demand for its products and services doesn’t go down, or that its brand and overall business performance is not impacted.

For example, staying appropriately aligned with the market and its trends enabled Netflix to create a new value proposition in the face of its competition from Blockbuster and others. It enabled Amazon to debut its cloud based services when none existed. It drove IBM to shift its strategy and accordingly its spending away from its hardware business to the cloud, AI, and other digital innovations.

So, we see how staying connected with the market and being agile can help an organization to survive as well as thrive. Additionally, staying connected with the market and its trends can help organizations to not only deliver what’s best for its audiences and customers but it can help them see opportunities that they otherwise wouldn’t be able to see that easily. For example, a number of us know how Google started out as a major search engine. But over the years we have seen them expand their capabilities to create even more products and services. For example, they have expanded into marketing, and other businesses. Recently, using their existing capabilities and access to the information that they already have access to and based on the direction of the market, they launched “Google Flights”, a service which allows customers to find the best flights. This service now competes and threatens existing players such as Expedia and other online travel agencies. Another such example is that of Google Hotel Ads, which provides hotels with a new platform to increase their digital reach and generate digital demand through other channels rather than making their properties available through traditional Internet portals. Again, by launching these products and services Google stands to disrupt the digital pioneers in the market such as Expedia, Booking.com, and others.

So, in summary, the nature of the digital world and how it operates necessitates that organizations not only align themselves to the market, its trends and its audiences, but also to adopt agile practices that can help them respond to those market conditions effectively.

Customer centricity

The third dimension to measure one’s digital transformation journey is that of customer centricity. Almost every business book and the many strategy discussions today emphasize the need to be customer centric. Although organizations have known about the need to focus on customers since they have had customers, one wonders why is ‘customer centricity’ so important now. The answer is that over the years, as organizations have grown to bring in more customers through automation and online technologies, they had started to drift away from providing the levels of personal attention that they used to give to their customers when there were no such systems. So, we see that those systems seem to have come in between the organization and its customers. As the world is increasingly becoming digital and organizations are scaling their operations further, they are rushing to build functions and features in their systems, people, processes, and culture to ensure that while they can continue to scale and grow using these systems, they stay close to their customers.

Organizations also need to become customer-centric because customers are more empowered than before. Customers, for example, have access to more information, are equipped with state of the art gadgets and have strong peer networks that empower them to make more effective and instant decisions. The enterprise challenge thus is to recognize those realities and to find innovative ways to connect to the consumer ecosystems making their services more useful to those consumers.

We should also remember that customer centricity is much more than building a few bells and whistles on an organization’s websites or apps. We know through research and empirical evidence that customer experience has multiple dimensions such as offering the right price, personalization, response time, look and feel, needs fulfillment, feeling of getting a good experience, good quality, and so on. So, it’s easy to see why organizations need to take a longer term view of this topic rather than brushing it under the rug by adopting a few band aid practices. In fact, many organizations have found that taking a holistic view of customer centricity may require completely reimagining their businesses or having them completely alter their business models. As a result, we see organizations making customer centricity as part of their core strategy and making it part of their key strategic imperatives. Facebook for example highlights the need to “…give people the power…” as part of its vision and mission. Microsoft mentions the need “to empower every person and every organization on the planet to achieve more.” Walmart talks about “… bringing value to customers” as well as “…accelerating innovation to save customers both money and time.” And the list goes on.

Becoming customer-centric in this digital economy starts with asking a number of questions such as these:

In this digitalized world, how can we get to know our customers better?
What relevant data can we capture from our customer journeys? And then, how can we use that data to improve those journeys, learn about their preferences and behaviors and meet their needs?
How can we provide superb customer experiences consistently through all of an organization’s digital and non-digital channels?
Based on our business models, what are the best ways to engage our customers?
How can we better fulfill their needs and provide them differentiated products and services?
And so on.

As we can see becoming customer-centric is a larger problem and requires that an organization take a longer-term view and start addressing the various facets that will help the organization become truly customer-centric. In summary, this means that an organization needs to define a customer-centric operating model for itself and then to guide its transformation based on that operating model and framework.

— End