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JA N U A RY 2 0 1 4

Your Digital Journey Is
Being Mapped by Your
Scott Clarke (Capgemini Consulting), interview...

Your Digital Journey
Is Being Mapped by
Your Customers
At heart, digital business is about pe...

tally mature segment of companies, what the
research refers to as “Digirati”, this also involves

lems. Companies will begin to shift their focus
away from simply attracting highly profitable cust...

tive approaches to the market that can be
accelerated through digital technology.

age. There is n...

enterprise-wide innovation and ensuring that businesses continue to make decisions and manage

Regardless of the length of the journey and the pace
of change you set, you need to have a clear v...
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Your Digital Journey is Being Mapped by Your Customers

Capgemini's Scott Clarke talks with with MIT Sloan Management Review contributing editor Michael Fitzgerald about the impact of digital transformation and the reception of the research in the market.

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Your Digital Journey is Being Mapped by Your Customers

  1. 1. JA N U A RY 2 0 1 4 Your Digital Journey Is Being Mapped by Your Customers Scott Clarke (Capgemini Consulting), interviewed by Michael Fitzgerald
  2. 2. MIT SLOAN MANAGEMENT REVIEW Your Digital Journey Is Being Mapped by Your Customers At heart, digital business is about people, not tech, says Capgemini’s Scott Clarke. S SCOTT CLARKE (CAPGEMINI CONSULTING), INTERVIEWED BY MICHAEL FITZGERALD cott Clarke has been the point person in North America for the research Capgemini Consulting and MIT’s Center for Digital Business are conducting on digital transformation. In his role as Customer Experience Practice lead at Capgemini Consulting, Clarke focuses on what digital technology contributes to the dynamic between company and customer. He says that companies seeking transformative effects from their digital activities often start with the customer, then spread into other areas like process improvement and business model innovation. He spoke with MIT Sloan Management Review contributing editor Michael Fitzgerald about the impact of digital transformation and the reception of the research in the market. What was the reaction to the research originally, and how has it changed? When we started this journey three years ago, digital transformation was nothing more than a “buzz” term for many clients. For others, it had snowballed into an all-encompassing concept that represented broad elements of the company but lacked a clear vision and definition. Now it has become more real for organizations, as opposed to an abstract concept. Conversations with clients tend to be a lot more focused on tactics and immediate results. There’s a lot more emphasis on the metrics and ROI of the digital journey. We’re seeing a lot more focus on governance, on what it means for the inner workings of the organization, and on how different business units can work together to drive the digital advantage. Why are things changing? Organizations recognize they have to be in the game. It is becoming a strategic necessity for organizations trying to deal with the demands and opportunities of the new global economy. Companies know that competitors are starting to leverage the power of digital and don’t want to be left behind. The ones that understand it realize that, whether or not they have invested in digital at an organizational level, the people that really matter, customers and employees, are already embracing digital in their own way. It’s a matter of responding to that demand. 1 SLOANREVIEW.MIT.EDU
  3. 3. DIGITAL TRANSFORMATION tally mature segment of companies, what the research refers to as “Digirati”, this also involves combining predictive analytics with a decisionmanagement capability to effectively automate the high volume of small customer-related decisions that organizations need to make every day. What we try to communicate is that digital is not about the technology at all. It’s about the people that use that technology — your customers, your partners, your employees — and their ability to make quicker and smarter decisions as a result of this technology. In the current environment, the customer is much more empowered, sophisticated and demanding. Companies have a massive opportunity to work with customers to create a new set of capabilities and experiences. That’s what we try to help our clients understand. Digital is a significant paradigm shift in how you do business. Some companies get that better than others. Is there still a lot of perception that it’s just buzz? I don’t think that’s the case. It’s become a matter of prioritization. Companies understand they need to start to automate and integrate systems, doing more for less, creating more efficiency in business. Companies tend to get nervous when they see it as a bigger umbrella term, “transforming the business.” Transformation scares companies. It always has. In the past, transformation was often associated with large IT implementations that drove little ROI to the business, at least not that could be accurately or reliably measured. Digitally mature companies tend to prioritize a number of guiding principles. It is the prevalence of these principles in the way that companies interact inside and outside their organization that sets them apart from companies who are at the lower end of the digital maturity continuum. These principles include collaboration — the ability to engage with communities inside and outside your company, to co-create solutions to common problems. At the heart of this is co-ideation and coinnovation — working together to create better outcomes and solve tougher problems. The question is, what are the business benefits? That’s where it gets challenging. Nobody has put forth a incontrovertible set of industry-specific benchmarks, to say, “If I’m a chemical company or a [communications company], and I invest in these new business practices, what can I expect to see and when?” When articulating the business case for digital there is the usual debate over causation. Are profitable companies more likely to invest heavily in digital capabilities or do companies become more profitable because they invest heavily in digital? Our research has shown that in fact both are true but the business case still needs further quantification. Then there’s integration. This includes the integration of channel capabilities in order to allow customers to move seamlessly from channel to channel without disruption or loss of information. It also includes the integration of processes and systems, breaking down traditional organizational silos to enable a more unified and holistic approach to the market. Also, transparency. As we move from the age of information asymmetry to the age of information democracy, it is paramount that organizations maintain an open dialogue with their employees and customers. Organizations need to be transparent in not only communicating the decisions they’ve made, but also, why they made them. The other challenge is nobody really wants to own this in a company. It is risky; it is massive; it is a significant shift in organizational structure and culture. There is no Steve Jobs in a lot of the companies we talk to. They get it, but they don’t want to own it. They try to do things in small increments in order to show momentum and govern the process tightly. Once the benefits start to take form, they often look to expand the initiative across additional areas of the business. But it’s a slow process. There’s also rational decision-making — the ability to make decisions based on facts and figures rather than intuition and experience. For the most digi2 MIT SLOAN MANAGEMENT REVIEW SLOANREVIEW.MIT.EDU
  4. 4. DIGITAL TRANSFORMATION lems. Companies will begin to shift their focus away from simply attracting highly profitable customers to building and connecting intelligent communities, inside and outside the organization. Can companies still get transformation with tentative steps? They can, but it’s always going to be difficult to achieve this one function at a time. For instance, if you want to develop a single view of the customer, you have to break down the distinctions between different parts of the business, break down the walls that exist between your customer, your organization and your partner networks. You have to invest across channels and across business units. This can only be achieved through top-down leadership and enterprise-wide thinking. Did you get pushback from the bankers? There are excuses rather than pushback. “Oh, we’re not quite there yet,” or “Disparate systems and processes stand in the way.” There are always excuses as to why not to invest in digital capabilities. But ultimately the customer is demanding it from the companies they do business with, and some companies have responded in highly innovative ways. What we’re trying to get companies to do, when they embrace digital, is to do so in a way that is sensitive to the changing environment in which they exist. If we believe that the digital advantage comes from transforming the way organizations interact inside and outside the firm, then we must recognize that you can’t run the digital agenda from the boardroom. Take Giffgaff, for example. Giffgaff is a budget mobile telephone operator owned by Spain’s Telefonica. Over the last few years, Giffgaff has become one of Britain’s fastest-growing networks (more than 1 million customers), which they remarkably manage with a staff of 25. They do this by embracing the power of the social customer. Knowledgeable users/ customers are not only the front line of customer support but also a driving force in the running of the company itself, shaping product offerings, developing marketing materials, attracting new members and helping to promote the company. Giffgaff is essentially a company ran by its customers. Customers are rewarded with “payback points” for the contributions they make to the running of the company. These points can be applied against their monthly mobile services, taken as a cash reward, or donated to a charitable cause. It has to be much more collaborative, open and engaging. It has to be both outside-in and inside-out. That’s difficult for companies to understand, particularly the outside-in idea. It’s a whole different way of doing business, thinking of the customer as a partner, and that’s hard for companies to digest, because that’s not how they’ve grown up. We still want to do things to our customers and not with them. I was recently asked by a CMO of a leading bank how I thought banks and insurance companies would alter the way they interact with customers over the next three to five years. My response was that we are likely to see more and more customers choosing the companies they do business with, not merely because of the quality of their products and services, but because of the perceived collective wisdom of the tribe or community of customers they attract. We’re seeing it in health insurance, too. Partially in response to new healthcare reforms, many health insurers are trying to shift their focus from claims management to health and wellness solutions. One way of doing this is by connecting physicians, medical experts and customers in the form of collaborative communities. The participants in these communities work together to help drive better health outcomes. A customer may choose to bank with one bank over another because they think that bank has a greater propensity to attract smarter customers. Those “smart” customers will form part of a trusted network and will work with the experts in the bank to help the customer solve tougher financial prob- In the new world of social networks, the sum of the whole is truly greater than the sum of the individual parts. These are just a couple of examples of disrup3 MIT SLOAN MANAGEMENT REVIEW SLOANREVIEW.MIT.EDU
  5. 5. DIGITAL TRANSFORMATION tive approaches to the market that can be accelerated through digital technology. age. There is now a broad acceptance that to compete in the digital world organizations must find a way to cut through the “noise,” leveraging those valuable pieces of data “signals” that help to drive smarter, actionable decisions. More and more, we are seeing organizations searching for ways to turn data analytics into a strategic asset. The research says companies should start small and then iterate. What’s the difference between an effective pilot and one that traps you in a silo? It comes down to data. Companies who do piloting well, do it by leveraging an experimental design, using control groups. It’s critical to use control groups. You need to get baseline data to start with, and also to have governance, and have the appropriate executive buy in for the pilots as well. It can’t be done in silos, and it has to be transparent. How often does the skills gap come up? It comes up frequently. A number of analyst firms estimate that there are between 70,000 and 80,000 too few qualified statisticians in the U.S. alone to fully unlock the opportunities around big data analytics. You could easily triple that number when you consider the wide shortage of trained managers and executives to turn the outputs of advanced analytics into decisive action. If you’re going to do pilots, you have to agree up front what success looks like and how it is going to be measured. We’ve seen companies invest in a pilot, and the people running it think it’s successful, but executives push back, saying it’s not sufficient. You’ve got to get executive input at the outset about what it will take to convince them to move forward. Over the next few years we are going to see the talent competition between Fortune 500 companies heat up as they try to get the upper hand on the next wave of qualified mathematicians, statisticians, and econometricians emerging from business schools and doctoral programs, not just in the U.S., but worldwide. We are also likely to see more and more companies shift large portions of their training budgets to resolving this skill gap. Do these companies start in a specific area? Customer engagement and/or operational effectiveness tends to be the most common starting point. However, where you start depends largely on the level of industry regulation. In pharma and in banking, we’re seeing a lot more focus on internal operations up front. That’s something you can control with limited legal risk. When you’re in a non-regulated industry, like retail and CPG [consumer packaged goods], it’s much easier to embark on a pilot initiative around channel management or customer engagement. What are the core emerging technologies you see? Real-time data analysis, marketing and sales automat i on ( Inte g r ate d Marke t i ng and S a l e s Management) and collaboration tools are the most obvious. While not new to the world of customer management, each of these capabilities is evolving rapidly in terms of sophistication and usability. Moreover, many of these capabilities are now moving to the cloud. When we’re engaged with companies starting the digital journey, more times than not it starts around the customer: introducing new digital channels like mobile or social to the existing channel mix. In addition, we are seeing a much greater investment in big data analytics. An even more important trend is the integration of multiple technologies into complex technology ecosystems that provide unprecedented enterprisewide capabilities. The ability to manage customers, channels, information and partners in one integrated system is a critical enabler to driving Organizations are becoming overwhelmed with the sheer volume of digital data that they have to man4 MIT SLOAN MANAGEMENT REVIEW SLOANREVIEW.MIT.EDU
  6. 6. DIGITAL TRANSFORMATION enterprise-wide innovation and ensuring that businesses continue to make decisions and manage processes better, quicker and more efficiently. You see management teams not getting it or not prioritizing it. When you start talking transformation, it scares people. In some cases, it can take companies three to five years to build out the necessary capabilities. People are being measured on results next month or this week and often can’t get their heads around the notion of a three- to five-year journey. They simply can’t wait for the business benefits. Hence you have to balance the long-term plan with short- to medium-term results. What about social media or mobile? Social and mobile will continue to grow in importance as key pillars of the integrated customer experience. Customers want to engage companies on their own terms — when, where and how they want. Social and mobile helps to make this possible. You also need metrics and performance measures in place that are real to the business and that can help inform and guide decisions along the way. Perhaps most important, you have to focus on some core principles of change management, which apply to both the C-suite and the grassroots. Effective change comes from people knowing what the organization is striving for and why, what is expected of them, having the necessary skills and support to act on this knowledge and having the right motivation and incentive to want to do things differently. It’s starts with transparency and thrives on collaboration. Ironically, two of the core principles of a digitally mature company. Marketing to consumers’ mobile has long been viewed as something of a holy grail by businesses — prized but always beyond reach. Recently, however, new mobile technologies have gone mainstream, making the elusive goal of an alwayson connection with customers firmly within reach of even the smallest business. With mobile technology comes the ability to provide customers with real-time, personalized messaging at a time and place that will deliver the greatest results. With the focus on location, relevancy and immediacy, mobile technology is already beginning to change the way that organizations interact with their customers and the way customers interact with each other. Five years from now, what do you think digital transformation will mean for companies? Social and mobile both provide customers with unique rational and emotional experiences. However, the key is not to think about social and mobile as stand-alone channels. Companies should focus on the entirety of the customer experience and how mobile and social contribute to this experience. We’re on the brink of something pretty enormous. We’ll see the greatest improvements around customer engagement and operational efficiency. Companies can’t do it the way they’ve done it and continue to drive profit. They need to find ways to go to market better, quicker and cheaper. Social and mobile become significantly more powerful when their capabilities are combined with those of traditional channels to create a differentiated “all-channel” experience. This, of course, starts with a thorough understanding of the customer journey and the key “moments of truth” that drive the greatest value to the customer. Whatever your industry, the way you engage your customers (or they engage you) will be fundamentally different in the future than it is today. Not just at the point of sale but between purchases, and not just for B2C but B2B as well. We’re already seeing companies trying to engage their customers in a much more intelligent and continuous manner. Digital is the best way of creating that set of outcomes in an efficient and effective way. Do you run into management teams not up to the task of digital transformation? 5 MIT SLOAN MANAGEMENT REVIEW SLOANREVIEW.MIT.EDU
  7. 7. DIGITAL TRANSFORMATION Regardless of the length of the journey and the pace of change you set, you need to have a clear vision of where you want to get to and how you want to get there. However, while a roadmap is a critical part of managing the journey you can’t lose sight of the quick win, short-term opportunities. You’ll never get to the finish line unless you deliver rewards along the way. Don’t be afraid to celebrate those outcomes with the customer either. Involve them in the journey. Some companies have done that well, like Starbucks with My Starbucks, Dell with Idea Storm, and Procter & Gamble with P&G Connect. They’ve found ways to turn customers into business partners, which not only drives innovation but helps to restore a sense of trust and confidence in an increasingly cynical customer base. Michael Fitzgerald is the contributing editor for MIT Sloan Management Review on the topic of digital transformation. Copyright © Massachusetts Institute of Technology, 2014. All rights reserved. 6 MIT SLOAN MANAGEMENT REVIEW SLOANREVIEW.MIT.EDU