In the past, corporate strategy was managed by a central group of leaders. These CXOs evaluated options, determined strategies and cascaded direction down through the organization. Solely relying on this approach can doom your digital transformation efforts. Instead, companies need to combine centralized, top-down planning with a bottom-up, grassroots contribution from everyone. CXOs can chart direction and advocate for endpoints, but they cannot map out each mile marker along the way.

Digital strategy requires challenging traditional thinking. One needs to bring in new thinking into the organization. The focus should be to acquire talent from the outside that understands the functional aspects of digital. Thoughts and ideas from strategic partners should be solicited to challenge the status quo. Finally you have to establish an environment to re-skill and retool the employees including the CEO to become digital transformational leaders.

As part of the planning process, leadership needs to continually:

  • Question existing models and starting points for organizational design
  • Challenge the decision process and focus on decisions that influence customer experience

Organizations are taking top-down leadership approaches to digital transformation.

  • Create a balance between digital and human engagement to support and influence customer behavior
  • Proactively develop a change management plan to help employees operate in a digitally transformed organization
  • Review all plans through the lens of whether they contribute to the vision of winning markets and being a disruptor
  • Use agile approaches to develop an integrated plan for digital transformation to succeed across the front, middle and back offices

More importantly, CXOs need to foster an organization and culture that generates ideas and innovation across the employee base while helping them change to the new operating model.

Change how you are organized

Organizations are taking two topdown leadership approaches to digital transformation. The first is appointing an existing CXO to head the initiative with leaders from the typical silos of business including operations, IT, finance and marketing. The second approach is appointing a new C-level resource, such as the Chief Digital Officer. Appointing a C-level executive to spearhead an emerging segment underscores its importance and provides focus, but in a lot of cases this is the exception, not the rule. While the Chief Digital Officer is gaining in popularity, only 6% of the top 1,500 companies across the globe have appointed one, according to PwC.5

Regardless of whether digital transformation is led by a new appointment or existing CXO, in the case of digital, boundary lines become blurred and ultimately everyone has to contribute to change

Silos can exist across functions, geographies, product lines. Given the company-wide impacts on the front, middle and back offices, cross-functional leadership teams must be created to drive this collaboration. Whether a company has a defined Chief Digital Officer or not, the CFO and CIO are just as accountable for the organization’s success.

Leaders need to challenge legacy thinking and structure if they intend to foster disruption.

CEOs can think through the following to drive change:

  • Appointment of a top-level sponsor to drive digital
  • Creation of a digital transformation office with the representatives from the different business lines
  • Providing clear ownership to people across organizational silos to drive the digital agenda
  • Instituting the right funding model to drive digital initiatives
  • Ensuring innovation and transformation initiatives remain focused on customer outcomes
  • Creating a change management office that enables internal groups to innovate and transform while challenging status quo

At the same time, successful digital transformation is not assured by a name at the top of an “org chart.” Leaders need to challenge legacy thinking and structure if they intend to foster disruption. Whether through new structures such as joint ventures, startups or small incubation groups, leaders need to think beyond the current walls of the organization to drive digital transformation.

One company, in an effort to transform itself, created a separate product incubation company with a new leadership team right across the road from the parent organization. That company was given six months to deliver a new product, full flexibility and freedom in their approach and the authority to hire anyone from the outside or existing organization (while the existing organization itself was prohibited from poaching talent in the new firm). The incubation company succeeded and they shut down the parent company and moved the employees. They cannibalized their current business model to create a disruptive and transformative model of itself

Risks like this take a new kind of thinking, and a company-wide culture that is committed to change.

Change your culture

Digital disruption requires a cultural shift that penetrates into the innovative DNA of a company.

A digital culture is one that can support and sustain innovation at the accelerated pace of the digital world. It requires building an organization on a foundation of data-based decision making, experimentation and willingness to accept if small initiatives fail.

Cultural transformation requires changing engrained organizational mindsets. To begin this process, CEOs and other CXOs should deploy a tactic that requires no investment: communication. Any communication plan should address:

  • The need for a culture change, highlighting the risks if the company fails to transform
  • Unified tone at the top
  • Opportunities to inspire employees, clients and partners
  • Stakeholder management, including ongoing education and training
  • A feedback loop that reports successes and failures

Experimentation, iterations and feedback loops are core components of design thinking, a methodology on which digital transformation is often founded, that reimages business process around customer outcomes.

We have created similar collaboration efforts at EXL, such as our “All Ideas Matter” initiative. We take in thousands of ideas, many of which are incremental and low risk changes, but every employee making incremental changes can have a huge impact. Companies can layer into these types of initiatives larger scale products, such as advanced automation, incorporating talent from outside sources or a new approach to product development, to make a step function change.

Leaders also need to foster openness to new ideas, new technology and new business models.

The key is to establish and align the focus of change initiatives, whether driven top-down or bottom up, on whether or not an initiative is enhancing customer experience. At the end of the day, we are also all customers ourselves. We know the difference between a good customer experience and a bad one.

The power of the strategic partner

In the digital era, service providers often bring more than skills and technology. Strong service partners can, in fact, offer a material lift to a company’s culture of innovation as well as enhance their digital strategy and capabilities. Service providers bring capabilities in niche areas and are often nimble enough to help organizations transform themselves.

For example, our early investments in analytics at EXL allowed us to bring to bear thousands of data scientists and analytics employees, proprietary methodologies and a deep roster of machine learning algorithms that our clients would have taken years and hundreds of millions of dollars of investment to replicate. Service providers not only bring competency in special areas but the proven learnings and ability to implement them. One example is our partnerships with brick-and-mortar retailers to create a differentiated online-plus-offline experience for their customers. EXL helped them by combining analytics from sensor and mobile data across different sections of a store, using Wi-Fi pings, online customer profiles and mobile apps to get a more unified view of the customer. Leveraging the unified customer data, retailers are able to build better relationships.

Digital transformation programs require a new kind of service provider, one who is capable of driving innovation but also one who is trusted to truly be viewed as a strategic partner. The cornerstone of this is whether the partner can provide the combination of domain experience, industry expertise and capabilities that match or surpass the current internal capabilities. Domain expertise can be the difference between a technology solutions chasing a problem to an industry problem that is addressed by digital intervention.

A good example of this is in the area of First Notice of Loss (FNOL), the process of an insurance customer first notifying their insurer of a car accident, house fire, broken water heater or any number of issues. This is a crucial moment of truth for the customer, which we’ve transformed through the use of machine learning, cognition and multiple automation interventions. Without our deep insurance experience, it would be less likely for a provider to integrate a solution addressing such an industry-specific challenge.

For companies and their service providers to operate as strategic partners, a service provider must be able to prove:

  • Domain expertise and best practices
  • Shared values
  • A “one team mindset,” where the provider can operate as an extension of the organization as opposed to functioning as a third-party order taker
  • Proactive with innovative approaches
  • Ability to change at a more rapid rate

Speed is a capability

Business today has to address the pace, breadth and depth of change. Speed is now a capability. New technology has come quickly and the cost of deploying it to transform legacy environments is dropping.

Companies cannot transform in the digital era simply through updating customer portals, nor can they simply focus on upgrading legacy. They need to focus on transforming their legacy environments while building the business model of the future.

Legacy can be upgraded more simply today than in the past with cloud deployment, point solutions, technology wrappers and other techniques. One example includes our partnership with a global insurer to support an enterprise-wide digital transformation agenda across multiple lines of business, as well as addressing its needs in the Asian and Latin American markets. Our consulting team helped them redesign and lower the cost of operations using robotics process automation (RPA). In addition, we transformed their customer acquisition process by helping their agency and third party distribution channels to become more targeted and grow revenues by embedding analytics.

Transforming legacy environments also has the benefit of opening up investment for innovation. Digital transformation requires investment, but every organization has a limited capacity to invest. Transforming the legacy environment should create efficiencies that fund and feed the development of new operating models.

As companies progress along their journeys, CEOs should remember to maintain a balance – between the digital world and the human touch, between front, middle and back offices, and between products and services. The choice should never be “either/or” but “and.” CEOs and CXOs should also use technology to enhance decisions and support change as they focus on both transforming their business “as is” as well as framing the environment for the future.

Done well, companies can thrive. Digital transformation moves from a threat to an opportunity. For most, this will require that companies first disrupt themselves.

References

  1. http://recode.net/2015/09/03/bookexcerpt-business-model-transformation/
  2. http://images.apple.com/newsroom/pdfs/Q1FY17DataSummary.pdf
  3. http://www.businessinsider.com/netflixoriginal-shows-in-2017-full-list-2017-2
  4. http://iireporter.com/lemonade-reportsinsurance-claim-paid-in-3-seconds-withno-paperwork/
  5. http://www.cio.com/article/3020005/cio-role/only-6-of-the-top-1-500-globalcompanies-have-cdos.html

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