Five to ten years ago, developing digital channels and capabilities was often enough to give an enterprise a competitive advantage. But that is no longer the case. Today, every bank is expected to have online services and mobile apps. Major supermarkets are expected to be like Tesco, which offers mobile telephony services and mobile banking in addition to loyalty points, online ordering, and various delivery options. And every discount airline now uses ecosystems online to offer a range of partner-based services covering accommodation, vehicle rental, and activities.

But too many enterprises have taken a piecemeal approach. This has led to competitors all having the same me-too websites, customer care apps, or chatbots, which is leading firms to realize that there is more to digital transformation than digital channels and bundling digital products with the core product offer. In markets where the piecemeal approach is common, incumbents are now seeing that digital transformation has potential for differentiation way beyond the addition of yet another digital channel. To these more mature markets, digital transformation offers a major change to the operating models of incumbent firms. It impacts not only the channels they use to serve customers, but the entire way in which the value propositions are designed and delivered to customers.

The siloed approach to a Digital Transformation Program is very common. Frequently, it is a customer-care-only led digital transformation initiative to drive care to digital channels. Not uncommon is also a marketing-only led digital transformation initiative focused on digital marketing. More commonly, it is an IT-only led digital transformation initiative focused on a “build it and they will come” approach to digital transformation.

And it often leads to lackluster results. A global study by Harvard Business Review, looks at digital experience across industries. The report finds that 53% of enterprises consider a “silo mentality among management and workforce” as one of the main contributing factors when digital transformation has failed to yield desired results. According to Perry Hewitt, a digital strategy adviser who consults for Harvard Business School, “Where an initiative is seen as purely IT-led or purely marketing-led, the other senior stakeholders don’t feel they have skin in the game.”

Forward-looking organizations recognize this. Such enterprises recognize that digital transformation requires bold action that focuses on systemic, enterprise-wide change. According to Daniel Newman, CEO of Broadsuite Media Group, change is only possible if enterprises build the right kind of organization to embrace what’s possible. Change that breaks down organizational silos. The challenge is that the complexity of business has been compounded by the emerging digital reality. This makes it extremely difficult to know where to begin, how fast to transform, and how the different functions in an organization must work together to achieve the objectives.

Set a holistic and ambitious enterprise-wide Digital Transformation target

We at Synergy Consulting Group developed a proprietary framework that looks at digital transformation more holistically across the entire enterprise, to help you set a true enterprise-wide Digital Transformation Program. We call this the ‘4D+1’ Digital Transformation framework.

The SCG framework sees two distinct areas of the business where digital transformation will impact an incumbent in traditional industries: the core business and the digital adjacency growth areas outside of the core. It recognizes that the core business is the cash-cow that funds any transformation, and thus digitization must help breathe new life into it and protect it even while laying the groundwork for long-term change. At the same time, enterprises must make experimentation with digital businesses and disruptive business models standard practice, and be prepared for when these disruptive business models displace and possibly cannibalize their own core business. 

The SCG framework handles all this with four interrelated pillars that support short and long-term action, underpinned and enhanced by a “Digital DNA”. The four pillars are: 

• Pillar one: digitally smart operations
  Even when the core business of an incumbent is under threat from digital transformation, it usually remains a viable source of revenue for years. But as the core business faces increased risk of disruption, the potential future declines in revenues from the core business can be mitigated by efficiency improvements resulting from the digitization of core operations. DBS Bank of Singapore called this the “Fix the basics” phase of its “Be Digital to the Core” digital transformation pillar, which ran from 2009-2014. Digitizing core business operations is more than just efficiency improvements, however. Digital operations are also more agile and able to better support the digital transformation in customer experience, the building of multi-sided ecosystem platforms, and disruptive digital new businesses, which are the next three pillars of the SCG digital transformation framework. This is why DBS continued its “Be Digital to the Core” digital transformation pillar with a phase 2 “Increase velocity” from 2014 onwards.
• Pillar two: digitally smart customer experience journeys
  Digitally transforming the customer experience has become one of the primary methods by which enterprises differentiate themselves in the era of digital transformation. This helps feed customer demands for “omni-channel experiences” — smooth integration of digital and physical interactions that ensures consistency across channels. Meeting those expectations involves extensive cross-functional work and coordination and optimization of customer journeys. Many banks have embraced the challenge. DBS Bank in Singapore, the Santandar-owned OpenBank in Spain, Emirates NBD in Dubai, and ADCB in Abu Dhabi are upending the way consumers use banks via journeys and online and mobile experiences. As an example, DBS’s customer experience scores increased from rock bottom among major banks in Singapore in 2009 to top of the list by 2013. For more information on customer experience management and how to implement it, see our detailed white paper: From Satisfaction to Emotionally Connected.
• Pillar Three: Digitally smart ecosystem collaboration platforms
  Incumbents use multi-sided collaboration platforms to place themselves at the center of emerging digital ecosystems and capture digital opportunities outside their core business. The platforms enable ecosystem participants and act as an orchestrator of the ecosystem collaboration and interaction. By providing a suite of back-office applications, data analytics, and development tools, they make it easy for ecosystem participants to innovate and deliver services. For example, a platform offered by a telecom operator could enable 3rd-party developers focused on automobiles to create apps as diverse as engine diagnostics, media streaming, and driver analysis for setting insurance rates. Developers use the platform’s APIs to connect to billing systems, voice systems, location tracking tools, and deep-packet inspection of online behavior while in the car. The developer then integrates all this in real-time for monetization and customer experience enhancement. Success in the ecosystem platform play can lead to a wealth of acquired data that can enhance an incumbent’s venture into more disruptive digital plays, our framework’s 4^th pillar.
• Pillar 4: Smart and selective disruptive digital plays
  Launching disruptive business models is always risky. It can have an immediate or long-term cannibalization effect on the core business. More frequently and more importantly, risks stem from failures in planning or execution. Nevertheless, in the rapidly changing digital world, experimentation with disruptive innovation is critical. And it is a complex undertaking that requires an interplay of IT, cross-functional management, analysis, deal making, and planning. For the online world, Apple’s Appstore is the reigning example of a 2-sided ecosystem platform that has leveraged the wealth of data insights is has gained from being the orchestrator of the app ecosystem. It uses analyses on successful apps from its AppStore to selectively invest in digital plays, either by acquiring existing 3rd party developers or by building a competing play of its own. A quick review of Apple’s acquisitions shows that quite a few of them (Shazam, Siri, HopStop, Embark, and Locationary, to name a few) where listed on the Appstore for some years before their acquisition by Apple. It therefore benefits twice – first from having the platform and second from insight into what it should do next.

Digital DNA

While companies may start on their digital transformation journeys by launching initiatives across all 4 pillars, the speed and effectiveness of the transformation in those 4 pillars improves dramatically as the firm gradually builds digital into its DNA. For those firms not born digital, digital maturity will be achieved only with foundational changes in the organization’s culture, which are largely driven by changes in the workforce, leadership, and the overall approach to governance. It is all supported by changes in IT structures and data stores. Firms must also remember that working digital into corporate DNA is not an end in and of itself – rather it is a method for reshaping the business to become more agile and responsive, both in its core, and new business lines. DBS called this its “Transform into a 22,000 person startup” digital transformation pillar.

If all this sounds like a lot of work, it is. And there is a lot more to the framework than what I’ve covered. But the work is absolutely necessary, as no industry is safe. Some are already gone. (When was the last time you saw someone use actual film? Or a travel agent?)

See if our Digital Transformation Program Consulting Practice can help you. 

For more information about our insight on digital transformation, download Synergy Consulting Group’s White Paper: The Digital Transformation Imperative