Digital transformation is high on executives’ agendas for 2018. Many have started the move and are investing millions of dollars in digitizing their operation. They do so in the name of customer convenience, frictionless interactions and the pursuit of delivering an “Amazon-like” customer experience. News flash: Amazon is not profitable and does not care about profitability. Do you have the same privilege of not being profitable?
If your firm, like most others who are not Amazon, still expects to turn a profit, why then are you undertaking digital transformation? The argument that “everyone else is doing it” is not a good enough answer to why you are spending millions in digital. The fact that your consultants told you to go digital: again, not a good answer.
I am not saying you shouldn’t adopt some digital tools for your business. I am saying you need to do it strategically and not as an impulse. Here are several strategic questions for you to consider before going digital.
1. What is the real intention: cost or value? Are you trying to reduce costs or do you seek to add value for customers? If you seek to reduce costs, be ready to reduce prices. Customers are not stupid and will expect that, in exchange for doing all the work, they will get to keep the lion’s share of the margins (remember Amazon margins? You can hardly see them with a magnifying glass). Be ready for the real impact of your digital transformation, not only on your cost structure, but on your profits as well.
“Technology is what we do with it and how we use it. Use it strategically with a customer context, and it will amplify loyalty.”
2. What is the role of the human experience in your new digital experience? Are you planning to replace people, or are you planning to amplify the human experience? This is usually a neglected question. Most companies do not have a holistic view of digital and human experiences. The answer should be “both.” You will need to design for it, as it will not happen by itself. Your employees and customers need to understand how digital fits within the bigger context and what their role is alongside the digital channels.
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3. What do your customers think about digital? Do all your customers share that view? Catch yourself next time you are saying “this is the future and what millennials want” (your consultants really got to you.) Our client work has uncovered that digital channels may erode the value customers place on brands leading to reduced brand loyalty. Find out what will create value to your customers in the context of them adapting to your new digital platform.
4. What differentiates your business? If all organizations transform their business to become digital, will you become just like your competitors? If so, what is your next strategic differentiation? What is your next innovation? What are the reasons customers will come to you and not to your smallest competitor who also has an app? This question should not be ignored as it goes to the core of your business and customer relationships.
Digital transformation without clear answers to the above questions is nothing short of self commoditization. You risk driving your business to a place where customers fail to see the value you deliver and have no reason to prefer your brand, pay premium price, advocate to others or come back for more. Digital is a technology, a tool. And as a smart client once told me, “even a fool with a tool is just a fool.” Let us not make the same mistake again that many made in the past, believing that technology will save our businesses. Technology is what we do with it and how we use it. Use it strategically with a customer context, and it will amplify loyalty. Rush into it without any strategic planning and find yourself poorer in both budget and profits.