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The 2016State of
DIGITAL
TRANSFORMATION
By Brian Solis with Jaimy Szymanski
Includes survey data from 528 digital transformation leaders and strategists
Digital Darwinism continues to impact businesses as technology
and societies evolve. As a result, organizations are moving away
from “business as usual” as they pursue digital transformation
to compete. Today, companies are undergoing varying extents
of modernization, with systems, models, processes, and
architectures advancing along the way.
In the second edition of our “State of Digital transformation”
research, we set out to learn how companies are changing and
the challenges and opportunities they face while doing so. The
data and insights in this report are based on the input of more
than 500 digital transformation strategists and executives who
are leading change within their organizations. This year, we are
seeing companies evolve, with some changing faster and deeper
than others. But, what’s most clear is, two years after our previous
industry overview, companies are still facing significant challenges
to operate in a digital economy.
We learned that efforts in customer experience often serve as
the heart and soul of digital transformation, as we also saw in
2014. At the same time, many organizations continue to wrestle
with the balance of technology and organizational priorities to
define a collaborative and productive path toward change. In
many ways, IT remains influential in driving digital transformation.
As a result, companies are still prioritizing technology ahead
2
EXECUTIVE SUMMARY
of customer-centricity and investing in front- and back-office
solutions without a clear understanding of customer expectations,
preferences, or values. IT is the department most frequently
included in digital Centers of Excellence (CoEs), and updating
information technology is currently the second-highest priority in
terms of digital transformation initiatives.
But, focusing on customer experience (CX) through the lens of
technology has its limitations. For example, in 2014 we found
that 88% of companies were undergoing digital transformation
as a means to improve CX, but only 25% had mapped their
customer journeys.1
In 2016, companies are making progress,
but customer-centricity still appears to be more about words
than actions. Although CX remains a top driver of digital
transformation, only half of the companies we studied have
mapped or are mapping the customer journey. While CX
mapping is becoming more prominent, it still must gain greater
traction to counterbalance (and give purpose to) investments in
technology roadmaps.
In 2016, innovation has become a key priority in digital
transformation efforts. This trend is rapidly gaining momentum as
companies look to the startup ecosystem as a means to innovate
and tap into the new expertise and talent often missing from more
traditional organizations.
CX remains the top driver of digital transformation, but IT and
marketing still influence technology investments (even without fully understanding
customer behaviors and expectations).
Fifty-five percent of those responsible for digital transformation
cite “evolving customer behaviors and preferences” as their
primary catalyst.
Only half (54%) of survey respondents have completely mapped
out the customer journey within the last year or are in the process of doing so.
A mere 20% of digital transformation leaders are studying the
mobile customer journey and/or designing for real-time “micro moments” in
addition to customer journey work.
The top three digital transformation initiatives at organizations
today are accelerating innovation (81%); modernized IT infrastructure with
increased agility, flexibility, management, and security (80%); and improving
operational agility to more rapidly adapt to change (79%).
Digital transformation is largely led by the CMO (34%).
Just 29% of companies have a multi-year roadmap to guide digital
transformation evolution.
REPORT
HIGHLIGHTS
3
DEFINING DIGITAL TRANSFORMATION
Over our years of digital transformation research, we’ve learned that there are many
definitions for the topic depending on who you talk to in the ecosystem. And, when
rooted in the context of CX efforts, digital transformation carries even broader
implications and opportunities for companies. Based on interviews with digital and
innovation leaders over the past few years, we continually adapt our definition to reflect
its current state and direction. For this report, we define digital transformation as:
The realignment of or investment in new technology, business models,
and processes to drive value for customers and employees and more effectively compete
in an ever-changing digital economy.
4
Executives are going “all in” on exploring the impact and potential of digital on their
companies and markets. To what extent these companies change, and how quickly, is
dependent on a variety of elements ranging from culture to expertise to insights, and
everything in between.
Digital transformation is working its way from the edges of the organization to the
middle. Disparate efforts throughout the company, whether it’s IT, marketing, or
innovation, are starting to unite around a common effort to organize work, align
executives and direction, and reframe business models. One of the driving factors
behind those cross-functional efforts is CX.
THE 2016 STATE OF
DIGITAL TRANSFORMATION
4
Companies look to customer behavior
to inform and lead change, which puts
CX at the heart of accelerating digital
transformation initiatives. More than half
(55%) of those responsible for digital
transformation cite “evolving customer
behaviors and preferences” as their top
driver of digital transformation (see Figure 1).
But it’s not just about chasing digital
customers. As technology and customer
behavior evolve, businesses are
identifying new ways to increase reach,
revenue, and impact.
Fifty-three percent cite “growth
opportunities in new markets” as a driver
to not only reach existing customers in
better ways, but also to expand markets.
The better companies understand digital
customers, identify new markets, and
increase digital literacy, the more they
earn signi cant competitive advantages.
This causes pressure for other companies
to respond. Almost half of those surveyed
(49%) cited “increased competitive
pressure” as driving their efforts.
CX CONTINUES TO DRIVE
DIGITAL TRANSFORMATION EFFORTS
FIGURE 1.
TOP DRIVERS OF DIGITAL
TRANSFORMATION
Question: What are the key drivers
of digital transformation within
your organization? Drivers are
trends or factors that
catalyze change.
5
Evolving
customer
behaviors and
preferences
55%
Growth
opportunities
in new markets
53%
Increased
competitive
pressure
49%
New
standards in
regulatory and
compliance
42%
In 2016, we introduced the digital transformation OPPOSITE framework based on three
years of interviews with executives who are gaining traction in driving mature digital
transformation initiatives.2
OPPOSITE (see Appendix) is an acronym that represents a
step-by-step approach companies can take to accelerate and unify efforts around digital
transformation. These steps are based on a series of people-centric best practices, which
represent Orientation, People, Processes, Objectives, Structure, Insights and Intent,
Technology, and xecution. peci cally, we learned those companies that invested in
better understanding the customer experience, as well as the digital and mobile journeys,
were able to identify actionable insights and purpose. We found parallel trends and best
practices emerged in our 2016 State of Digital Transformation survey data.
MORE COMPANIES ARE MAPPING
THE DIGITAL CUSTOMER JOURNEY
In 2014, only 25% of companies undergoing digital transformation had mapped the
customer journey and had a clear understanding of new or underperforming digital
touchpoints. Yet, 88% cited CX as the driver for change. Technology was widely viewed at
the time as the solution for change. But now, businesses are investing in a customer-centric
approach that offers insights, purpose, and direction.
Today, 54% of survey respondents have completely mapped out or are in the process
of mapping out the customer journey (within the last year). That’s more than double the
gure from only two years ago. These companies do so to nd the data to de ne and
prioritize their digital transformation roadmap.
Even though this is progress, to date only half (52%) of companies currently have a
customer research program in place to better understand digital customer behaviors.
DIGITAL TRANSFORMATION
BEST PRACTICES
6
AN ELITE GROUP OF COMPANIES IS
EXPLORING “MOBILE-FIRST” MOMENTS
Mobile has given way to what Google refers to as “micro-moments,”3
and they are
completely upending traditional customer journeys. These mobile- rst moments play
out in common scenarios when someone is intent to do, buy, or learn something.
As consumers increasingly use their phones to complete everyday activities, they’re
fracturing the consumer journey into hundreds of new “micro” touchpoints where
they seek real-time, mobile-optimized content, reviews, shared experiences, and
direction online. Traditional touchpoints, such as websites, contact centers,
representatives, af liates, etc., don t meet heightened expectations.
In fact, they deter from what’s becoming an on-demand customer
experience. As such, micro-moments represent new, critical
opportunities for brands to shape their decisions and preferences.
Despite all of this, just 20% of digital transformation leaders
are studying the mobile customer journey and/or designing for
real-time micro-moments in addition to customer journey work.
Clearly, for companies to mature through the six stages of digital
transformation, they must understand mobile’s impact on customer
decision-making, behaviors, and value.
Mobile is just the beginning of disruption in the customer journey.
With the runway for disruptive technologies still ahead (e.g., wearables,
Internet of Things (IoT), arti cial intelligence, virtual and augmented
reality), companies will need a resilient infrastructure that adapts to not
only mobile’s “micro-moments,” but also the impact of all these trends
and new devices over time. One way to do so is to evolve digital
transformation toward a state of innovation and adaptability. For
example, in our recent Six Stages of Digital Transformation research
(see Figure 2), we learned that mature companies were developing
“innovation” teams, departments, and of cial innovation centers
to study, partner with, invest in, acquire, and experiment with
emerging technologies.
20%
of digital
transformation
leaders are studying
the mobile customer
journey
7
FIGURE 2.
THE SIX STAGES OF DIGITAL TRANSFORMATION
8
From Altimeter Group’s 2016 report, The Six Stages of Digital Transformation, available for download from our website
Executives still don’t engage with the
brand or business the way customers
do. By not prioritizing customer journey
work, companies face challenges in
understanding new consumer behaviors
and missing related datasets for decision-
making. Companies that don’t grasp
or internalize the customer journey are
obstructed from seeing its potential for
optimization and innovation.
It’s not a surprise, therefore, that the top
challenge faced by those leading digital
transformation is understanding behavior
or impact of new connected customers
(71%) (see Figure 3). This trend has grown
since 2014, when 53% of respondents cited
familiarity with this challenge.
LEADERS
STRUGGLE TO
UNDERSTAND
NEW
CONNECTED
CUSTOMER
BEHAVIORS
FIGURE 3.
DIGITAL TRANSFORMATION CHALLENGES
Question: Each of the following describes different types of challenges surrounding digital transformation
initiatives. Please indicate the severity of each challenge as it relates to your digital transformation efforts.
ata reflects responses marked “challenging” and “very challenging.”
9
71%
Understanding
behavior or impact of
a new customer
63%
Changing company
culture to be agile
64%
Resources
67%
Risk management,
compliance, and/or
legal complications
69%
Lack of data or ROI to
justify value of digital
transformations
62%
Lack of digital transformation
budget allocation
As more companies evolve, change
agents are asking leaders for more
funding and resources. In turn, they’re
being asked for results projections to
support their requests and roadmaps.
This lack of data or ROI to justify the
value of digital transformation (69%) is
still holding companies back from taking
steps toward digital relevance, a sizable
increase from our 2014 survey wherein
only 34% of respondents cited the lack of
data as a challenge. Although we’re in an
era of Big Data, companies still struggle
to capture, comprehend, and act on
insights available to them. This increasing
gap between the ability to gather data
and actually act on it (or position it in a
compelling way) is affecting the potential
for digital transformation advancement.
Another top challenge facing digital
transformation is the very thing that
governs the course of business: a culture
that is pervasively risk-averse (63%).
Boards, shareholders, and stakeholders
want to make improvements and increase
pro tability but are often unwilling to
examine and change the governance
in place today. According to our
survey respondents, risk management,
compliance, and/or legal implications now
represent the third greatest challenge
at 67%. Yet, together, these are the very
things that can facilitate change while
creating a modern governance framework.
69%
of leaders are challenged
by a lack of data or
ROI to justify digital
transformation
10
The path to digital transformation is forged by those who aim to, or by default, blaze new
trails. However, it isn’t always clear early on who should drive or own digital transformation.
ver the years, s, s, I s, and even the newly appointed hief igital f cer
(CDO) have invested in initiatives that serve as the spark to move things forward. But,
they often operate in isolation simply because of the nature of everyday business. That
changes over time as champions of change realize they can make quantum leaps ahead by
partnering with those leading separate efforts.
THE CMO AND CEO CONTINUE TO LEAD
DIGITAL TRANSFORMATION
Who owns digital transformation? According to our survey, digital transformation is largely
led by the CMO (34%). Not far behind, though, is a digitally savvy generation of CEOs
who, at 27%, recognize that it’s time to lead their companies into the 21st century (see
Figure 4). This is a number that we expect to grow in the coming years.
Digital transformation originally gained traction with CIOs, when it was driven by
technology adoption over CX. Today, however, only 19% of CIOs are leading digital
transformation efforts. It’s understandable, as we found in earlier research that digital
transformation is now about people rst and technology second4
.
Interestingly, the newly titled “chief experience of cer” only represents % of leadership
initiatives, gaining no ground since our 2014 study (5%).
Either way, this is a role that will become prominent over time, title aside, as customers will
only continue to evolve. CMOs, CEOs, and CIOs will all assume CX-related responsibilities,
which makes a chief CX role unnecessary.
DIGITAL TRANSFORMATION
LEADERSHIP AND GOVERNANCE
FIGURE 4.
DIGITAL
TRANSFORMATION
LEADERSHIP FROM THE
C-SUITE
Question: Which executive is leading the digital
transformation initiative?
34%
CMO
27%
CEO
19%
CIO/CTO
15%
CDO
5%
CXO
11
DIGITAL DEPARTMENTS
ARE MORE COMMON THAN
“CENTERS OF EXCELLENCE”
Steering committees, digital departments, and Centers of
Excellence (CoEs) –– what do they all mean, and how are they
shaping digital transformation? Each, in their own way, is attempting
to tackle the unknown by learning from, experimenting with, and
adapting to new market dynamics.
Cross-functional steering committees are tasked
speci cally with solving for digital transformation at
an enterprise level. Marketing, IT, CX, HR, legal, etc., mix
and unite to carry an impact beyond any one silo. More
than half (53%) of companies have an informal digital
transformation steering committee that includes
representatives from one or more departments. And,
40% of these companies have formally sanctioned
committees as of cial working groups.
These formal workgroups, otherwise known as CoEs,
serve as the executive-sponsored entity to lead digital
initiatives. They typically have four to seven members,
coming primarily from IT (63%), mobile (41%), e-commerce
(40%), the C-suite (38%), and CX teams (38%). Legal is only
included in digital o s % of the time, a gure which will need
to increase over time to help rewrite the balance between risk and
opportunity (see Figure 5).
53%
of companies
have informal
digital transformation
steering comittees
40%
have formalized
committees
12
Digital departments are now very
common, with 81% of companies citing
their existence. Yet, only 40% have a
formalized cross-functional workgroup.
These digitally focused groups tend to
employ four to ve full-time employees.
But, as of now, they’re mainly focused
on emerging technologies and their
impact on one group rather than the
entire enterprise. This would imply that
companies are “doing digital” just to
“do digital” without involving multiple
stakeholders and making it a cross-
functional effort. Once this work connects
to other stakeholder groups, digital
transformation accelerates and its effect
becomes more profound in the process.
FIGURE 5.
DIGITAL CENTERS OF EXCELLENCE,
DEPARTMENTAL CONTRIBUTIONS
Question: What departments are represented in the digital center of excellence or digital hub?
Check all that apply.
81%
of companies
have digital
departments
13
28%
Social
30%
Customer
Service
32%
Marketing/
Advertising/Digital
38%
CX
38%
C-suite
40%
E-commerce
41%
Mobile
63%
IT
MEASURING DIGITAL TRANSFORMATION SUCCESS
Digital transformation progresses as companies invest in new pilots and initiatives. Experience and maturity also develop
as companies build an infrastructure upon modernized governance, operations, and digital education/training to support
change across the organization. Companies that mature do so by measuring advancement while making the case for next
steps. This requires evolving beyond legacy metrics and KPIs to more effectively align with trailblazing business objectives.
long the way, de ning what success looks like in each step and in the long-term, tracking toward these goals, and ultimately
communicating headway and learnings become a best-practice of the most advanced companies.
COMPANIES TIE DIGITAL TRANSFORMATION TO LEGACY
METRICS VS. NEW OPERATIONAL KPIS
When approaching digital transformation, many companies turn to traditional metrics to help validate the success of new
investments. Although this helps frame them within existing business paradigms, strategists must still rethink metrics to
chart future development in new channels, experiences, content, and devices. In the early stages of digital transformation
maturity, survey respondents revealed the six most important metrics that organizations can actually measure around digital
transformation right now are (see Figure 6).
FIGURE 6.
DIGITAL
TRANSFORMATION
SUCCESS TIED TO
MEASURING CUSTOMER
SATISFACTION
Question: hat are the ve most
important metrics your organization can
actually measure today related to digital
transformation?
26%
Revenue 25%
Content
Analytics
(Paid, Ownerd, Earned)
28%
Customer
Satisfaction
(NPS, CSAT)
27%
Web traffic
14
25%
Customer
Experience
27%
Productivity
Existing KPIs help validate early work
in digital transformation. But often,
measurement efforts are focused
on measuring isolated efforts
within each department/function.
For example, only 22% of those
surveyed cited having a content
strategy in place that addresses
customer needs at all journey stages,
but content analytics are in the top
ve most important metrics measured.
There is a disconnect between strategy
and measurement in digital transformation
efforts. In this instance, content is one of
the most important engagement tools in
every moment of truth, before, during, and
after transactions.
As companies mature, silos preventing an
integrated customer experience begin to
crumble as key stakeholder groups connect
across departments. This drives the development
of new measurement frameworks to align with digital
transformation roadmaps. We found in our Six Stages of
Digital Transformation research that over time, as the roadmap
becomes substantiated, gaps in measurement are identi ed
and an analytics inventory is audited. This clearly marks the
transition from maturity Stage 3 (Formalized) to Stage 4
(Strategic) when examining analytics as part of an overarching
digital transformation. During Stage 4 and beyond, new
outcomes and KPIs are generated to track inter-departmental
roadmap collaboration, integrated customer experiences, and
top-level business performance indicators. These may include
ustomer ifetime alue ( ), revenue creation, pro tability,
and increased market valuation, among others.
22%
have a content strategy
that addresses customer
needs throughout
their journey
15
DIGITALLY TRANSFORMING
COMPANIES EARN BUSINESS
ROI AND INFLUENCE CULTURE
Digital Darwinism favors those companies that invest in change.
Every executive and senior leader we interviewed since 2013
vehemently believes that digital transformation has no nal
destination on its horizon. The point of the journey is driving
incremental change to help their company progress along the
six stages.
Digital transformation isn’t easy though. Its true evolution
takes time and resources, with bene ts delivered in the long-
term. This, to some, can represent deliberate moves away
from delivering against quarterly returns. That’s the paradox
of investing in digital transformation; it gives returns to those
who treat it as a long-term investment versus those who expect
immediate impact.
According to our research, returns earned directly as a result
of digital transformation efforts are more than validating and
promising (see Figure 7). Companies are realizing types of ROI
any C-suite and board can appreciate: increased market share
(41%) and increased customer revenue (30%). Additionally,
the I of digital transformation is reflected in employee
morale. As the saying goes, “Happy employees equal happy
customers.” In that regard, 37% of respondents stated that
second to increased market share, employee engagement was
the next big return.
FIGURE 7.
TOP BENEFITS WITNESSED FROM
DIGITAL TRANSFORMATION EFFORTS
Question: hat bene ts have you already witnessed from your digital
transformation work?
41%
Increased
market share
Increased
customer
engagement
in digital
channels
37%
Positively
impacted
employee
morale
37%
Greater
volume of
web and/
or mobile
traffic
32%
Increased
customer
revenue
30%
16
In our Six Stages of Digital Transformation maturity model, we note that the sixth stage
reflects a state of innovation and agility. ompanies that explore innovation do so at
varying extents, but they all share a common goal of expanding the company’s market
perspective by exploring what digital customers want, how new technologies change
behaviors and expectations, and what latest technologies need to be tracked. In their
own way, companies seek to track emerging technology and trends, as well as gain new
expertise and talent. More advanced companies also aim to partner with startups and
startup ecosystems to innovate outside of its day-to-day operational culture.
COMPANIES PRIORITIZE INNOVATION AS
DIGITAL TRANSFORMATION EFFORTS MATURE
While CX was initially the primary catalyst for digital transformation, innovation, agility, and
the pursuit of digital relevance are the new factors driving companies along the maturity
model. For executives and senior leadership, the need to accelerate innovation (81%) was
at the top of the digital transformation agenda. Right behind it was the need to modernize
the IT infrastructure with increased agility, flexibility, management, and security (80%). nd,
the third priority for enterprise transformation is improving operational agility to more
rapidly adapt to change (79%).
Through these priorities, businesses are developing a roadmap that helps them compete
for the present while building a next-generation business model to compete for the future.
This work is organized into six pillars that form the foundation for the six maturity stages
(see Figure 8).
FUTURE TRENDS AND EVOLUTION
OF DIGITAL TRANSFORMATION
17
FIGURE 8.
DIGITAL TRANSFORMATION REQUIRES MULTIDISCIPLINARY INVOLVEMENT
GOVERNANACE AND
LEADERSHIP
An infrastructure that is driven by
leadership philosophies that determine
the fate of business evolution
DATA AND
ANALYTICS
How a company tracks data, measures
initiatives, extracts insights, and
introduces them into the organization
TECHNOLOGY
INTEGRATION
Implementing technology
that unites groups,
functions, and processes to
support a holistic CX
PEOPLE AND
OPERATIONS
Who is involved in
DIgital Transformation,
the roles they play,
the responsibilites and
accountabilities they carry,
and how a company enacts
change and manages
transformation, including its
roles, processes, systems,
and supporting models
DIGITAL LITERACY
Ways in which new expertise is
introduced into the organizations
CUSTOMER EXPERIENCE
The processes and strategies aimed at
improving touchpoints along the entire
customer journey
18
PROGRESSIVE COMPANIES INVEST IN
INNOVATION CENTERS AND TEAMS
Innovation is often limited when teams are not empowered to operate outside of their
day-to-day work. In our 2014 and 2016 surveys, we learned that 63% of leaders believed
changing company culture was a top challenge facing digital transformation. As a result,
more progressive companies are exploring innovation outside of the proverbial box.
To accelerate innovation, 46% of those surveyed stated that their company has launched
a formal “innovation center” to understand and test new technologies and develop new
solutions/services. Another 35% have formally tasked an innovation team to lead efforts.
e nd that more companies have digital departments than o s, but with innovation
departments and centers, its flip-flopped. This is likely because digital is more formalized
within companies than innovation, which is why in our maturity framework we found very
few companies at stage 6, “Innovative and Adaptive.”
This work opens the door to “future proo ng.” ore advanced companies combat
disruption and expand innovation efforts by partnering with startups, investors,
entrepreneurs, and universities to learn, invest, and acquire new technologies and
expertise. In 2015 and 2016, Altimeter and CapGemini Consulting published two reports
on the rise of innovation centers.5
In the most recent edition, we found that the key
objectives for these new innovation centers are:
51%
of companies partner
with the startup
ecosystem
28%
of companies focus
on product innovation
and/or concept
development
13%
of companies
hope to enhance
CX as a result of
their innovation
center
19
Digital transformation is as much a technology story as it is one about how people lead change inside and outside the company. The
human factor is pervasive in each of our reports on the subject. It’s really the driving force behind evolution and revolution in business.
In our 2014 report, pushing forward against existing “culture” was the top challenge facing digital transformation. In 2016,
understanding connected consumer behavior tops the list. oth reflect the human side of change. The same evolution in customer
behavior, expectations, and values are driving evolution among employees and their aspirations.
As a whole, digital transformation is young, and businesses are still learning where and how to change. But even in its early stages,
progressive companies are already seeing bene ts in how they compete and how they measure success.
The reality is that companies in every industry are facing similar challenges and looking at customer behavior and competitive pressure,
not just technology, as the source of drive and direction. Those making progress along the six stages of digital transformation are
investing in these best practices:
CONCLUSION
Study and map the digital customer experience.
Also, study and map the mobile customer journey.
Invest in ongoing customer research to better understand digital/mobile behaviors.
Develop a digital transformation roadmap.
Update/Innovate customer-facing technology in digital AND mobile.
Drive strategies that engage and guide customers seamlessly through digital, mobile, and
real-world journeys.
Improve processes/operations that expedite changes.
Build an agile, integrated, and scalable technology infrastructure.
Executives appoint someone to lead and pave the way for digital initiatives (budget, resources,
culture), as well as manage expectations among shareholders, stakeholders, and the board.
Form a working team to drive initiatives, coordinate activities/resources, and be accountable.
Establish new metrics that measure progress and track new outcomes.
DCX:
MOBILE:
RESEARCH:
ROADMAP:
TOUCHPOINTS:
OMNI-CHANNEL:
PROCESSES:
IT:
LEADERSHIP:
TASKFORCE:
METRICS:
20
BRIAN SOLIS
Brian Solis (@briansolis) is a digital analyst, anthropologist, and also a futurist. Brian
studies the effects of disruptive technology on business and society. More so, he
humanizes these impacts to help people see people differently and understand
what to do about it. He is an award-winning author and avid keynote speaker who
is globally recognized as one of the most prominent thought leaders in digital
transformation and innovation.
Brian has authored several best-selling books, including What’s the Future of
Business (WTF), The End of Business as Usual, and Engage!. His latest book, X,
explores the intersection of where business mee ts design to create engaging and
meaningful experiences.
JAIMY SZYMANSKI
Jaimy Szymanski (@jaimy_marie) is an industry analyst, focusing on how
organizations adapt their digital strategies and core business models to serve
the new “connected customer.” She has authored multiple research reports and
artifacts on the topics of digital transformation, the collaborative economy, the
autonomous world, consumer mobile, customer experience, and the Internet of
Things. Jaimy provides independent research and advisory services to companies
in varied industries that are affected by emerging technologies.
ABOUT THE
AUTHORS
21
OPEN RESEARCH This independent research report was 100% funded by Altimeter, a Prophet Company. This
report is published under the principle of Open Research and is intended to advance the
industry at no cost. This report is intended for you to read, utilize, and share with others; if
you do so, please provide attribution to Altimeter, a Prophet Company.
For this report, Altimeter, a Prophet Company worked with Phronesis Partners to conduct
a survey of 8 uali ed digital transformation strategists and executives leading change
within their companies. Respondents were from companies in varied industries, with more
than 250 employees, in the United States, Canada, United Kingdom, France, and Germany.
Over the past three years, Altimeter has also conducted a series of executive interviews
that informed this research, among other reports. We interviewed digital strategists and
executives at organizations undergoing digital transformation efforts about their journey in
adapting to the new digital customer experience.
ECOSYSTEM INPUT
PERMISSIONS The Creative Commons License is Attribution-Noncommercial ShareAlike 3.0 United States,
which can be found at https://creativecommons.org/licenses/by-nc-sa/3.0/us/.
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CONSTITUTE OR IMPLY ITS ENDORSEMENT, RECOMMENDATION, OR FAVORING BY THE AUTHORS OR
CONTRIBUTORS AND SHALL NOT BE USED FOR ADVERTISING OR PRODUCT ENDORSEMENT PURPOSES.
THE OPINIONS EXPRESSED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE
22
ltimeter, a rophet ompany, is a research and strategy consulting rm that helps companies
understand and take advantage of digital disruption. In 2015, Prophet acquired Altimeter
Group to bring forward-thinking digital research and strategy consulting together under one
umbrella and to help clients unlock the power of digital transformation. Altimeter, founded in
2008 by best-selling author Charlene Li, focuses on research in digital transformation, social
business and governance, customer experience, Big Data, and content strategy.
Altimeter, a Prophet Company
One Bush Street, 7th Floor
San Francisco, CA 94104
info@altimetergroup.com
www.altimetergroup.com
@altimetergroup
415-363-0004
ABOUT
ALTIMETER GROUP
HOW TO
WORK WITH US
Altimeter research is applied and brought to life in our client engagements. We help
organizations understand and take advantage of digital disruption. There are several ways
Altimeter can help you with your business initiatives:
Strategy Consulting. Altimeter creates strategies and plans to help companies act on business
and technology trends, including ethical and strategic data use and communications. Our team
of analysts and consultants work with global organizations on needs assessments, strategy
roadmaps, and pragmatic recommendations to address a range of strategic challenges and
opportunities.
Education and Workshops. Engage an Altimeter speaker to help make the business case to
executives or arm practitioners with new knowledge and skills.
Advisory. Retain Altimeter for ongoing research-based advisory: Conduct an ad-hoc session to
address an immediate challenge or gain deeper access to research and strategy counsel.
To learn more about Altimeter’s offerings, contact info@altimetergroup.com.
23
While researching digital transformation over the past three years, we’ve uncovered many common characteristics that companies exhibit
while growing through the stages of digital transformation maturity. Many of these commonalities were apparent in the results of our 2016
State of Digital Transformation survey data as well, and overlapping themes emerged. Examining these best practices amongst innovative
leaders resulted in a new framework recently published by Altimeter: the Eight Success Factors of Digital Transformation: How Businesses
Are Taking an O.P.P.O.S.I.T.E. Approach to Business as Usual.
As mentioned earlier, OPPOSITE is an acronym that offers companies a step-by-step approach to digital transformation. It stands for:
Orientation, People, Processes, Objectives, Structure, Insights & Intent, Technology, Execution.
The framework offers insights and new understanding of technology, data and the digital customer. By following the OPPOSITE approach,
digital transformation becomes identi able, approachable, and attainable for organizations. The IT framework is available for
download here (http://bit.ly/the-opposite).
Here’s an overview of the eight best practices of emergent leaders and the work they’re doing to evolve businesses in a digital economy:
Orientation: Establish a new perspective to drive meaningful change.
People: Understand customer values, expectations, and behaviors.
Processes: Assess operational infrastructure and update (or revamp) technologies, processes, and policies to support change.
Objectives: e ne the purpose of digital transformation, aligning stakeholders (and shareholders) around the new vision
and roadmap.
Structure: orm a dedicated digital experience team with roles/responsibilities/objectives/accountability clearly de ned.
Insights & Intent: Gather data and apply insights toward strategy to guide digital evolution.
Technology: Re-evaluate front- and back-end systems for a seamless, integrated, and native customer (and, ultimately,
employee) experience.
Execution: Implement, learn, and adapt to steer ongoing digital transformation and customer experience work.
APPENDIX: THE PATH TO DIGITAL TRANSFORMATION
TAKES AN O.P.P.O.S.I.T.E. APPROACH
24
This framework serves as a guide for change agents, like
you, to drive digital transformation. When combined with
this report, OPPOSITE guides and informs the development
of your digital transformation roadmap. It metaphorically
visualizes your work as a stack, building upward toward
change one stage at a time. Use it to steer your work in
shaping the DCX and the supporting infrastructure. Through
your efforts, the organization becomes not only technology-
savvy but more so people-centric. The company will become
agile and sets the stage for innovation.
This is true transformation, not just about digital. It’s in the
ongoing pursuit that makes change less about stages and
more about vision, purpose, and resolve. It’s time for a new
paradigm for business leadership, relevance, and prosperity.
1
Solis, Brian, Szymanski, Jaimy, and Lieb, Rebecca. The 2014 State of Digital
Transformation. Altimeter Group. 2014 (http://www.altimetergroup.com/2014/07/
the-2014-state-of-digital-transformation/).
2
Solis, Brian and Szymanski, Jaimy. The Six Stages of Digital Transformation Maturity. Altimeter, a
Prophet Company. 2016 (http://www2.prophet.com/l/69102/2016-02-08/3ksgvl).
3
Google, Think with Google. “Micro-Moments.” (https://www.thinkwithgoogle.com/collections/
micromoments.html).
4
Solis, Brian, Li, Charlene, and Szymanski, Jaimy. Digital Transformation: Why and How Companies
Are Investing in New Business Models to Lead Digital Customer Experiences. Altimeter Group.
2014 (http://www.altimetergroup.com/2014/04/new-research-understanding-the-digital-customer-
experience-drives-investment-in-digital-transformation/).
5
CapGemini and Altimeter Group. The Innovation Game and The Rise of Innovation Empires. 2015-
2016 (https://www.capgemini-consulting.com/the-innovation-game).
ENDNOTES
25

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The 2016 State of Digital Transformation - Altimeter

  • 1. The 2016State of DIGITAL TRANSFORMATION By Brian Solis with Jaimy Szymanski Includes survey data from 528 digital transformation leaders and strategists
  • 2. Digital Darwinism continues to impact businesses as technology and societies evolve. As a result, organizations are moving away from “business as usual” as they pursue digital transformation to compete. Today, companies are undergoing varying extents of modernization, with systems, models, processes, and architectures advancing along the way. In the second edition of our “State of Digital transformation” research, we set out to learn how companies are changing and the challenges and opportunities they face while doing so. The data and insights in this report are based on the input of more than 500 digital transformation strategists and executives who are leading change within their organizations. This year, we are seeing companies evolve, with some changing faster and deeper than others. But, what’s most clear is, two years after our previous industry overview, companies are still facing significant challenges to operate in a digital economy. We learned that efforts in customer experience often serve as the heart and soul of digital transformation, as we also saw in 2014. At the same time, many organizations continue to wrestle with the balance of technology and organizational priorities to define a collaborative and productive path toward change. In many ways, IT remains influential in driving digital transformation. As a result, companies are still prioritizing technology ahead 2 EXECUTIVE SUMMARY of customer-centricity and investing in front- and back-office solutions without a clear understanding of customer expectations, preferences, or values. IT is the department most frequently included in digital Centers of Excellence (CoEs), and updating information technology is currently the second-highest priority in terms of digital transformation initiatives. But, focusing on customer experience (CX) through the lens of technology has its limitations. For example, in 2014 we found that 88% of companies were undergoing digital transformation as a means to improve CX, but only 25% had mapped their customer journeys.1 In 2016, companies are making progress, but customer-centricity still appears to be more about words than actions. Although CX remains a top driver of digital transformation, only half of the companies we studied have mapped or are mapping the customer journey. While CX mapping is becoming more prominent, it still must gain greater traction to counterbalance (and give purpose to) investments in technology roadmaps. In 2016, innovation has become a key priority in digital transformation efforts. This trend is rapidly gaining momentum as companies look to the startup ecosystem as a means to innovate and tap into the new expertise and talent often missing from more traditional organizations.
  • 3. CX remains the top driver of digital transformation, but IT and marketing still influence technology investments (even without fully understanding customer behaviors and expectations). Fifty-five percent of those responsible for digital transformation cite “evolving customer behaviors and preferences” as their primary catalyst. Only half (54%) of survey respondents have completely mapped out the customer journey within the last year or are in the process of doing so. A mere 20% of digital transformation leaders are studying the mobile customer journey and/or designing for real-time “micro moments” in addition to customer journey work. The top three digital transformation initiatives at organizations today are accelerating innovation (81%); modernized IT infrastructure with increased agility, flexibility, management, and security (80%); and improving operational agility to more rapidly adapt to change (79%). Digital transformation is largely led by the CMO (34%). Just 29% of companies have a multi-year roadmap to guide digital transformation evolution. REPORT HIGHLIGHTS 3
  • 4. DEFINING DIGITAL TRANSFORMATION Over our years of digital transformation research, we’ve learned that there are many definitions for the topic depending on who you talk to in the ecosystem. And, when rooted in the context of CX efforts, digital transformation carries even broader implications and opportunities for companies. Based on interviews with digital and innovation leaders over the past few years, we continually adapt our definition to reflect its current state and direction. For this report, we define digital transformation as: The realignment of or investment in new technology, business models, and processes to drive value for customers and employees and more effectively compete in an ever-changing digital economy. 4 Executives are going “all in” on exploring the impact and potential of digital on their companies and markets. To what extent these companies change, and how quickly, is dependent on a variety of elements ranging from culture to expertise to insights, and everything in between. Digital transformation is working its way from the edges of the organization to the middle. Disparate efforts throughout the company, whether it’s IT, marketing, or innovation, are starting to unite around a common effort to organize work, align executives and direction, and reframe business models. One of the driving factors behind those cross-functional efforts is CX. THE 2016 STATE OF DIGITAL TRANSFORMATION 4
  • 5. Companies look to customer behavior to inform and lead change, which puts CX at the heart of accelerating digital transformation initiatives. More than half (55%) of those responsible for digital transformation cite “evolving customer behaviors and preferences” as their top driver of digital transformation (see Figure 1). But it’s not just about chasing digital customers. As technology and customer behavior evolve, businesses are identifying new ways to increase reach, revenue, and impact. Fifty-three percent cite “growth opportunities in new markets” as a driver to not only reach existing customers in better ways, but also to expand markets. The better companies understand digital customers, identify new markets, and increase digital literacy, the more they earn signi cant competitive advantages. This causes pressure for other companies to respond. Almost half of those surveyed (49%) cited “increased competitive pressure” as driving their efforts. CX CONTINUES TO DRIVE DIGITAL TRANSFORMATION EFFORTS FIGURE 1. TOP DRIVERS OF DIGITAL TRANSFORMATION Question: What are the key drivers of digital transformation within your organization? Drivers are trends or factors that catalyze change. 5 Evolving customer behaviors and preferences 55% Growth opportunities in new markets 53% Increased competitive pressure 49% New standards in regulatory and compliance 42%
  • 6. In 2016, we introduced the digital transformation OPPOSITE framework based on three years of interviews with executives who are gaining traction in driving mature digital transformation initiatives.2 OPPOSITE (see Appendix) is an acronym that represents a step-by-step approach companies can take to accelerate and unify efforts around digital transformation. These steps are based on a series of people-centric best practices, which represent Orientation, People, Processes, Objectives, Structure, Insights and Intent, Technology, and xecution. peci cally, we learned those companies that invested in better understanding the customer experience, as well as the digital and mobile journeys, were able to identify actionable insights and purpose. We found parallel trends and best practices emerged in our 2016 State of Digital Transformation survey data. MORE COMPANIES ARE MAPPING THE DIGITAL CUSTOMER JOURNEY In 2014, only 25% of companies undergoing digital transformation had mapped the customer journey and had a clear understanding of new or underperforming digital touchpoints. Yet, 88% cited CX as the driver for change. Technology was widely viewed at the time as the solution for change. But now, businesses are investing in a customer-centric approach that offers insights, purpose, and direction. Today, 54% of survey respondents have completely mapped out or are in the process of mapping out the customer journey (within the last year). That’s more than double the gure from only two years ago. These companies do so to nd the data to de ne and prioritize their digital transformation roadmap. Even though this is progress, to date only half (52%) of companies currently have a customer research program in place to better understand digital customer behaviors. DIGITAL TRANSFORMATION BEST PRACTICES 6
  • 7. AN ELITE GROUP OF COMPANIES IS EXPLORING “MOBILE-FIRST” MOMENTS Mobile has given way to what Google refers to as “micro-moments,”3 and they are completely upending traditional customer journeys. These mobile- rst moments play out in common scenarios when someone is intent to do, buy, or learn something. As consumers increasingly use their phones to complete everyday activities, they’re fracturing the consumer journey into hundreds of new “micro” touchpoints where they seek real-time, mobile-optimized content, reviews, shared experiences, and direction online. Traditional touchpoints, such as websites, contact centers, representatives, af liates, etc., don t meet heightened expectations. In fact, they deter from what’s becoming an on-demand customer experience. As such, micro-moments represent new, critical opportunities for brands to shape their decisions and preferences. Despite all of this, just 20% of digital transformation leaders are studying the mobile customer journey and/or designing for real-time micro-moments in addition to customer journey work. Clearly, for companies to mature through the six stages of digital transformation, they must understand mobile’s impact on customer decision-making, behaviors, and value. Mobile is just the beginning of disruption in the customer journey. With the runway for disruptive technologies still ahead (e.g., wearables, Internet of Things (IoT), arti cial intelligence, virtual and augmented reality), companies will need a resilient infrastructure that adapts to not only mobile’s “micro-moments,” but also the impact of all these trends and new devices over time. One way to do so is to evolve digital transformation toward a state of innovation and adaptability. For example, in our recent Six Stages of Digital Transformation research (see Figure 2), we learned that mature companies were developing “innovation” teams, departments, and of cial innovation centers to study, partner with, invest in, acquire, and experiment with emerging technologies. 20% of digital transformation leaders are studying the mobile customer journey 7
  • 8. FIGURE 2. THE SIX STAGES OF DIGITAL TRANSFORMATION 8 From Altimeter Group’s 2016 report, The Six Stages of Digital Transformation, available for download from our website
  • 9. Executives still don’t engage with the brand or business the way customers do. By not prioritizing customer journey work, companies face challenges in understanding new consumer behaviors and missing related datasets for decision- making. Companies that don’t grasp or internalize the customer journey are obstructed from seeing its potential for optimization and innovation. It’s not a surprise, therefore, that the top challenge faced by those leading digital transformation is understanding behavior or impact of new connected customers (71%) (see Figure 3). This trend has grown since 2014, when 53% of respondents cited familiarity with this challenge. LEADERS STRUGGLE TO UNDERSTAND NEW CONNECTED CUSTOMER BEHAVIORS FIGURE 3. DIGITAL TRANSFORMATION CHALLENGES Question: Each of the following describes different types of challenges surrounding digital transformation initiatives. Please indicate the severity of each challenge as it relates to your digital transformation efforts. ata reflects responses marked “challenging” and “very challenging.” 9 71% Understanding behavior or impact of a new customer 63% Changing company culture to be agile 64% Resources 67% Risk management, compliance, and/or legal complications 69% Lack of data or ROI to justify value of digital transformations 62% Lack of digital transformation budget allocation
  • 10. As more companies evolve, change agents are asking leaders for more funding and resources. In turn, they’re being asked for results projections to support their requests and roadmaps. This lack of data or ROI to justify the value of digital transformation (69%) is still holding companies back from taking steps toward digital relevance, a sizable increase from our 2014 survey wherein only 34% of respondents cited the lack of data as a challenge. Although we’re in an era of Big Data, companies still struggle to capture, comprehend, and act on insights available to them. This increasing gap between the ability to gather data and actually act on it (or position it in a compelling way) is affecting the potential for digital transformation advancement. Another top challenge facing digital transformation is the very thing that governs the course of business: a culture that is pervasively risk-averse (63%). Boards, shareholders, and stakeholders want to make improvements and increase pro tability but are often unwilling to examine and change the governance in place today. According to our survey respondents, risk management, compliance, and/or legal implications now represent the third greatest challenge at 67%. Yet, together, these are the very things that can facilitate change while creating a modern governance framework. 69% of leaders are challenged by a lack of data or ROI to justify digital transformation 10
  • 11. The path to digital transformation is forged by those who aim to, or by default, blaze new trails. However, it isn’t always clear early on who should drive or own digital transformation. ver the years, s, s, I s, and even the newly appointed hief igital f cer (CDO) have invested in initiatives that serve as the spark to move things forward. But, they often operate in isolation simply because of the nature of everyday business. That changes over time as champions of change realize they can make quantum leaps ahead by partnering with those leading separate efforts. THE CMO AND CEO CONTINUE TO LEAD DIGITAL TRANSFORMATION Who owns digital transformation? According to our survey, digital transformation is largely led by the CMO (34%). Not far behind, though, is a digitally savvy generation of CEOs who, at 27%, recognize that it’s time to lead their companies into the 21st century (see Figure 4). This is a number that we expect to grow in the coming years. Digital transformation originally gained traction with CIOs, when it was driven by technology adoption over CX. Today, however, only 19% of CIOs are leading digital transformation efforts. It’s understandable, as we found in earlier research that digital transformation is now about people rst and technology second4 . Interestingly, the newly titled “chief experience of cer” only represents % of leadership initiatives, gaining no ground since our 2014 study (5%). Either way, this is a role that will become prominent over time, title aside, as customers will only continue to evolve. CMOs, CEOs, and CIOs will all assume CX-related responsibilities, which makes a chief CX role unnecessary. DIGITAL TRANSFORMATION LEADERSHIP AND GOVERNANCE FIGURE 4. DIGITAL TRANSFORMATION LEADERSHIP FROM THE C-SUITE Question: Which executive is leading the digital transformation initiative? 34% CMO 27% CEO 19% CIO/CTO 15% CDO 5% CXO 11
  • 12. DIGITAL DEPARTMENTS ARE MORE COMMON THAN “CENTERS OF EXCELLENCE” Steering committees, digital departments, and Centers of Excellence (CoEs) –– what do they all mean, and how are they shaping digital transformation? Each, in their own way, is attempting to tackle the unknown by learning from, experimenting with, and adapting to new market dynamics. Cross-functional steering committees are tasked speci cally with solving for digital transformation at an enterprise level. Marketing, IT, CX, HR, legal, etc., mix and unite to carry an impact beyond any one silo. More than half (53%) of companies have an informal digital transformation steering committee that includes representatives from one or more departments. And, 40% of these companies have formally sanctioned committees as of cial working groups. These formal workgroups, otherwise known as CoEs, serve as the executive-sponsored entity to lead digital initiatives. They typically have four to seven members, coming primarily from IT (63%), mobile (41%), e-commerce (40%), the C-suite (38%), and CX teams (38%). Legal is only included in digital o s % of the time, a gure which will need to increase over time to help rewrite the balance between risk and opportunity (see Figure 5). 53% of companies have informal digital transformation steering comittees 40% have formalized committees 12
  • 13. Digital departments are now very common, with 81% of companies citing their existence. Yet, only 40% have a formalized cross-functional workgroup. These digitally focused groups tend to employ four to ve full-time employees. But, as of now, they’re mainly focused on emerging technologies and their impact on one group rather than the entire enterprise. This would imply that companies are “doing digital” just to “do digital” without involving multiple stakeholders and making it a cross- functional effort. Once this work connects to other stakeholder groups, digital transformation accelerates and its effect becomes more profound in the process. FIGURE 5. DIGITAL CENTERS OF EXCELLENCE, DEPARTMENTAL CONTRIBUTIONS Question: What departments are represented in the digital center of excellence or digital hub? Check all that apply. 81% of companies have digital departments 13 28% Social 30% Customer Service 32% Marketing/ Advertising/Digital 38% CX 38% C-suite 40% E-commerce 41% Mobile 63% IT
  • 14. MEASURING DIGITAL TRANSFORMATION SUCCESS Digital transformation progresses as companies invest in new pilots and initiatives. Experience and maturity also develop as companies build an infrastructure upon modernized governance, operations, and digital education/training to support change across the organization. Companies that mature do so by measuring advancement while making the case for next steps. This requires evolving beyond legacy metrics and KPIs to more effectively align with trailblazing business objectives. long the way, de ning what success looks like in each step and in the long-term, tracking toward these goals, and ultimately communicating headway and learnings become a best-practice of the most advanced companies. COMPANIES TIE DIGITAL TRANSFORMATION TO LEGACY METRICS VS. NEW OPERATIONAL KPIS When approaching digital transformation, many companies turn to traditional metrics to help validate the success of new investments. Although this helps frame them within existing business paradigms, strategists must still rethink metrics to chart future development in new channels, experiences, content, and devices. In the early stages of digital transformation maturity, survey respondents revealed the six most important metrics that organizations can actually measure around digital transformation right now are (see Figure 6). FIGURE 6. DIGITAL TRANSFORMATION SUCCESS TIED TO MEASURING CUSTOMER SATISFACTION Question: hat are the ve most important metrics your organization can actually measure today related to digital transformation? 26% Revenue 25% Content Analytics (Paid, Ownerd, Earned) 28% Customer Satisfaction (NPS, CSAT) 27% Web traffic 14 25% Customer Experience 27% Productivity
  • 15. Existing KPIs help validate early work in digital transformation. But often, measurement efforts are focused on measuring isolated efforts within each department/function. For example, only 22% of those surveyed cited having a content strategy in place that addresses customer needs at all journey stages, but content analytics are in the top ve most important metrics measured. There is a disconnect between strategy and measurement in digital transformation efforts. In this instance, content is one of the most important engagement tools in every moment of truth, before, during, and after transactions. As companies mature, silos preventing an integrated customer experience begin to crumble as key stakeholder groups connect across departments. This drives the development of new measurement frameworks to align with digital transformation roadmaps. We found in our Six Stages of Digital Transformation research that over time, as the roadmap becomes substantiated, gaps in measurement are identi ed and an analytics inventory is audited. This clearly marks the transition from maturity Stage 3 (Formalized) to Stage 4 (Strategic) when examining analytics as part of an overarching digital transformation. During Stage 4 and beyond, new outcomes and KPIs are generated to track inter-departmental roadmap collaboration, integrated customer experiences, and top-level business performance indicators. These may include ustomer ifetime alue ( ), revenue creation, pro tability, and increased market valuation, among others. 22% have a content strategy that addresses customer needs throughout their journey 15
  • 16. DIGITALLY TRANSFORMING COMPANIES EARN BUSINESS ROI AND INFLUENCE CULTURE Digital Darwinism favors those companies that invest in change. Every executive and senior leader we interviewed since 2013 vehemently believes that digital transformation has no nal destination on its horizon. The point of the journey is driving incremental change to help their company progress along the six stages. Digital transformation isn’t easy though. Its true evolution takes time and resources, with bene ts delivered in the long- term. This, to some, can represent deliberate moves away from delivering against quarterly returns. That’s the paradox of investing in digital transformation; it gives returns to those who treat it as a long-term investment versus those who expect immediate impact. According to our research, returns earned directly as a result of digital transformation efforts are more than validating and promising (see Figure 7). Companies are realizing types of ROI any C-suite and board can appreciate: increased market share (41%) and increased customer revenue (30%). Additionally, the I of digital transformation is reflected in employee morale. As the saying goes, “Happy employees equal happy customers.” In that regard, 37% of respondents stated that second to increased market share, employee engagement was the next big return. FIGURE 7. TOP BENEFITS WITNESSED FROM DIGITAL TRANSFORMATION EFFORTS Question: hat bene ts have you already witnessed from your digital transformation work? 41% Increased market share Increased customer engagement in digital channels 37% Positively impacted employee morale 37% Greater volume of web and/ or mobile traffic 32% Increased customer revenue 30% 16
  • 17. In our Six Stages of Digital Transformation maturity model, we note that the sixth stage reflects a state of innovation and agility. ompanies that explore innovation do so at varying extents, but they all share a common goal of expanding the company’s market perspective by exploring what digital customers want, how new technologies change behaviors and expectations, and what latest technologies need to be tracked. In their own way, companies seek to track emerging technology and trends, as well as gain new expertise and talent. More advanced companies also aim to partner with startups and startup ecosystems to innovate outside of its day-to-day operational culture. COMPANIES PRIORITIZE INNOVATION AS DIGITAL TRANSFORMATION EFFORTS MATURE While CX was initially the primary catalyst for digital transformation, innovation, agility, and the pursuit of digital relevance are the new factors driving companies along the maturity model. For executives and senior leadership, the need to accelerate innovation (81%) was at the top of the digital transformation agenda. Right behind it was the need to modernize the IT infrastructure with increased agility, flexibility, management, and security (80%). nd, the third priority for enterprise transformation is improving operational agility to more rapidly adapt to change (79%). Through these priorities, businesses are developing a roadmap that helps them compete for the present while building a next-generation business model to compete for the future. This work is organized into six pillars that form the foundation for the six maturity stages (see Figure 8). FUTURE TRENDS AND EVOLUTION OF DIGITAL TRANSFORMATION 17
  • 18. FIGURE 8. DIGITAL TRANSFORMATION REQUIRES MULTIDISCIPLINARY INVOLVEMENT GOVERNANACE AND LEADERSHIP An infrastructure that is driven by leadership philosophies that determine the fate of business evolution DATA AND ANALYTICS How a company tracks data, measures initiatives, extracts insights, and introduces them into the organization TECHNOLOGY INTEGRATION Implementing technology that unites groups, functions, and processes to support a holistic CX PEOPLE AND OPERATIONS Who is involved in DIgital Transformation, the roles they play, the responsibilites and accountabilities they carry, and how a company enacts change and manages transformation, including its roles, processes, systems, and supporting models DIGITAL LITERACY Ways in which new expertise is introduced into the organizations CUSTOMER EXPERIENCE The processes and strategies aimed at improving touchpoints along the entire customer journey 18
  • 19. PROGRESSIVE COMPANIES INVEST IN INNOVATION CENTERS AND TEAMS Innovation is often limited when teams are not empowered to operate outside of their day-to-day work. In our 2014 and 2016 surveys, we learned that 63% of leaders believed changing company culture was a top challenge facing digital transformation. As a result, more progressive companies are exploring innovation outside of the proverbial box. To accelerate innovation, 46% of those surveyed stated that their company has launched a formal “innovation center” to understand and test new technologies and develop new solutions/services. Another 35% have formally tasked an innovation team to lead efforts. e nd that more companies have digital departments than o s, but with innovation departments and centers, its flip-flopped. This is likely because digital is more formalized within companies than innovation, which is why in our maturity framework we found very few companies at stage 6, “Innovative and Adaptive.” This work opens the door to “future proo ng.” ore advanced companies combat disruption and expand innovation efforts by partnering with startups, investors, entrepreneurs, and universities to learn, invest, and acquire new technologies and expertise. In 2015 and 2016, Altimeter and CapGemini Consulting published two reports on the rise of innovation centers.5 In the most recent edition, we found that the key objectives for these new innovation centers are: 51% of companies partner with the startup ecosystem 28% of companies focus on product innovation and/or concept development 13% of companies hope to enhance CX as a result of their innovation center 19
  • 20. Digital transformation is as much a technology story as it is one about how people lead change inside and outside the company. The human factor is pervasive in each of our reports on the subject. It’s really the driving force behind evolution and revolution in business. In our 2014 report, pushing forward against existing “culture” was the top challenge facing digital transformation. In 2016, understanding connected consumer behavior tops the list. oth reflect the human side of change. The same evolution in customer behavior, expectations, and values are driving evolution among employees and their aspirations. As a whole, digital transformation is young, and businesses are still learning where and how to change. But even in its early stages, progressive companies are already seeing bene ts in how they compete and how they measure success. The reality is that companies in every industry are facing similar challenges and looking at customer behavior and competitive pressure, not just technology, as the source of drive and direction. Those making progress along the six stages of digital transformation are investing in these best practices: CONCLUSION Study and map the digital customer experience. Also, study and map the mobile customer journey. Invest in ongoing customer research to better understand digital/mobile behaviors. Develop a digital transformation roadmap. Update/Innovate customer-facing technology in digital AND mobile. Drive strategies that engage and guide customers seamlessly through digital, mobile, and real-world journeys. Improve processes/operations that expedite changes. Build an agile, integrated, and scalable technology infrastructure. Executives appoint someone to lead and pave the way for digital initiatives (budget, resources, culture), as well as manage expectations among shareholders, stakeholders, and the board. Form a working team to drive initiatives, coordinate activities/resources, and be accountable. Establish new metrics that measure progress and track new outcomes. DCX: MOBILE: RESEARCH: ROADMAP: TOUCHPOINTS: OMNI-CHANNEL: PROCESSES: IT: LEADERSHIP: TASKFORCE: METRICS: 20
  • 21. BRIAN SOLIS Brian Solis (@briansolis) is a digital analyst, anthropologist, and also a futurist. Brian studies the effects of disruptive technology on business and society. More so, he humanizes these impacts to help people see people differently and understand what to do about it. He is an award-winning author and avid keynote speaker who is globally recognized as one of the most prominent thought leaders in digital transformation and innovation. Brian has authored several best-selling books, including What’s the Future of Business (WTF), The End of Business as Usual, and Engage!. His latest book, X, explores the intersection of where business mee ts design to create engaging and meaningful experiences. JAIMY SZYMANSKI Jaimy Szymanski (@jaimy_marie) is an industry analyst, focusing on how organizations adapt their digital strategies and core business models to serve the new “connected customer.” She has authored multiple research reports and artifacts on the topics of digital transformation, the collaborative economy, the autonomous world, consumer mobile, customer experience, and the Internet of Things. Jaimy provides independent research and advisory services to companies in varied industries that are affected by emerging technologies. ABOUT THE AUTHORS 21
  • 22. OPEN RESEARCH This independent research report was 100% funded by Altimeter, a Prophet Company. This report is published under the principle of Open Research and is intended to advance the industry at no cost. This report is intended for you to read, utilize, and share with others; if you do so, please provide attribution to Altimeter, a Prophet Company. For this report, Altimeter, a Prophet Company worked with Phronesis Partners to conduct a survey of 8 uali ed digital transformation strategists and executives leading change within their companies. Respondents were from companies in varied industries, with more than 250 employees, in the United States, Canada, United Kingdom, France, and Germany. Over the past three years, Altimeter has also conducted a series of executive interviews that informed this research, among other reports. We interviewed digital strategists and executives at organizations undergoing digital transformation efforts about their journey in adapting to the new digital customer experience. ECOSYSTEM INPUT PERMISSIONS The Creative Commons License is Attribution-Noncommercial ShareAlike 3.0 United States, which can be found at https://creativecommons.org/licenses/by-nc-sa/3.0/us/. DISCLAIMER ALTHOUGH THE INFORMATION AND DATA USED IN THIS REPORT HAVE BEEN PRODUCED AND PROCESSED FROM SOURCES BELIEVED TO BE RELIABLE, NO WARRANTY EXPRESSED OR IMPLIED IS MADE REGARDING THE COMPLETENESS, ACCURACY, ADEQUACY, OR USE OF THE INFORMATION. THE AUTHORS AND CONTRIBUTORS OF THE INFORMATION AND DATA SHALL HAVE NO LIABILITY FOR ERRORS OR OMISSIONS CONTAINED HEREIN OR FOR INTERPRETATIONS THEREOF. REFERENCE HEREIN TO ANY SPECIFIC PRODUCT OR VENDOR BY TRADE NAME, TRADEMARK, OR OTHERWISE DOES NOT CONSTITUTE OR IMPLY ITS ENDORSEMENT, RECOMMENDATION, OR FAVORING BY THE AUTHORS OR CONTRIBUTORS AND SHALL NOT BE USED FOR ADVERTISING OR PRODUCT ENDORSEMENT PURPOSES. THE OPINIONS EXPRESSED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE 22
  • 23. ltimeter, a rophet ompany, is a research and strategy consulting rm that helps companies understand and take advantage of digital disruption. In 2015, Prophet acquired Altimeter Group to bring forward-thinking digital research and strategy consulting together under one umbrella and to help clients unlock the power of digital transformation. Altimeter, founded in 2008 by best-selling author Charlene Li, focuses on research in digital transformation, social business and governance, customer experience, Big Data, and content strategy. Altimeter, a Prophet Company One Bush Street, 7th Floor San Francisco, CA 94104 info@altimetergroup.com www.altimetergroup.com @altimetergroup 415-363-0004 ABOUT ALTIMETER GROUP HOW TO WORK WITH US Altimeter research is applied and brought to life in our client engagements. We help organizations understand and take advantage of digital disruption. There are several ways Altimeter can help you with your business initiatives: Strategy Consulting. Altimeter creates strategies and plans to help companies act on business and technology trends, including ethical and strategic data use and communications. Our team of analysts and consultants work with global organizations on needs assessments, strategy roadmaps, and pragmatic recommendations to address a range of strategic challenges and opportunities. Education and Workshops. Engage an Altimeter speaker to help make the business case to executives or arm practitioners with new knowledge and skills. Advisory. Retain Altimeter for ongoing research-based advisory: Conduct an ad-hoc session to address an immediate challenge or gain deeper access to research and strategy counsel. To learn more about Altimeter’s offerings, contact info@altimetergroup.com. 23
  • 24. While researching digital transformation over the past three years, we’ve uncovered many common characteristics that companies exhibit while growing through the stages of digital transformation maturity. Many of these commonalities were apparent in the results of our 2016 State of Digital Transformation survey data as well, and overlapping themes emerged. Examining these best practices amongst innovative leaders resulted in a new framework recently published by Altimeter: the Eight Success Factors of Digital Transformation: How Businesses Are Taking an O.P.P.O.S.I.T.E. Approach to Business as Usual. As mentioned earlier, OPPOSITE is an acronym that offers companies a step-by-step approach to digital transformation. It stands for: Orientation, People, Processes, Objectives, Structure, Insights & Intent, Technology, Execution. The framework offers insights and new understanding of technology, data and the digital customer. By following the OPPOSITE approach, digital transformation becomes identi able, approachable, and attainable for organizations. The IT framework is available for download here (http://bit.ly/the-opposite). Here’s an overview of the eight best practices of emergent leaders and the work they’re doing to evolve businesses in a digital economy: Orientation: Establish a new perspective to drive meaningful change. People: Understand customer values, expectations, and behaviors. Processes: Assess operational infrastructure and update (or revamp) technologies, processes, and policies to support change. Objectives: e ne the purpose of digital transformation, aligning stakeholders (and shareholders) around the new vision and roadmap. Structure: orm a dedicated digital experience team with roles/responsibilities/objectives/accountability clearly de ned. Insights & Intent: Gather data and apply insights toward strategy to guide digital evolution. Technology: Re-evaluate front- and back-end systems for a seamless, integrated, and native customer (and, ultimately, employee) experience. Execution: Implement, learn, and adapt to steer ongoing digital transformation and customer experience work. APPENDIX: THE PATH TO DIGITAL TRANSFORMATION TAKES AN O.P.P.O.S.I.T.E. APPROACH 24
  • 25. This framework serves as a guide for change agents, like you, to drive digital transformation. When combined with this report, OPPOSITE guides and informs the development of your digital transformation roadmap. It metaphorically visualizes your work as a stack, building upward toward change one stage at a time. Use it to steer your work in shaping the DCX and the supporting infrastructure. Through your efforts, the organization becomes not only technology- savvy but more so people-centric. The company will become agile and sets the stage for innovation. This is true transformation, not just about digital. It’s in the ongoing pursuit that makes change less about stages and more about vision, purpose, and resolve. It’s time for a new paradigm for business leadership, relevance, and prosperity. 1 Solis, Brian, Szymanski, Jaimy, and Lieb, Rebecca. The 2014 State of Digital Transformation. Altimeter Group. 2014 (http://www.altimetergroup.com/2014/07/ the-2014-state-of-digital-transformation/). 2 Solis, Brian and Szymanski, Jaimy. The Six Stages of Digital Transformation Maturity. Altimeter, a Prophet Company. 2016 (http://www2.prophet.com/l/69102/2016-02-08/3ksgvl). 3 Google, Think with Google. “Micro-Moments.” (https://www.thinkwithgoogle.com/collections/ micromoments.html). 4 Solis, Brian, Li, Charlene, and Szymanski, Jaimy. Digital Transformation: Why and How Companies Are Investing in New Business Models to Lead Digital Customer Experiences. Altimeter Group. 2014 (http://www.altimetergroup.com/2014/04/new-research-understanding-the-digital-customer- experience-drives-investment-in-digital-transformation/). 5 CapGemini and Altimeter Group. The Innovation Game and The Rise of Innovation Empires. 2015- 2016 (https://www.capgemini-consulting.com/the-innovation-game). ENDNOTES 25