On October 17, 2017, at Adweek in NYC, the NetForum gathered 33 digital executives – including 15 CEOs/GMs and 10 CMOs/CROs – to deep dive into why Digital Transformation is such a hot topic today. Most of the NetForum participants spoke up to share with the group opportunities and challenges they face in their jobs. Our special guests were Michael Lawless, Chief Experience Officer, Accenture Interactive’s Digital Transformation practice, and Jim Cooper, Editorial Director of Adweek.
A. In short:
- Digital Transformation is top of mind — top leadership is really committed to doing something big.
- But it’s not merely a top down imperative, it’s a reaction to customer data — it’s a survival imperative supported by concrete data.
- DT is not one size fits all. It’s a process of revisiting your entire value chain and seeing what assets you have to play in the new paradigm. And may be you don’t have any and you should sell and move on.
- It’s about people and process, and corporate priorities, which may not be aligned with investing in Digital Transformation.
B. Digital Transformation is top of mind.
Adweek’s Jim Cooper told us that something is going on, it’s not hype — this is a unique moment in the economy. So much so that Adweek is gearing up to cover it from a front row seat. Accenture Interactive’s Michael Lawless recently became part of an entire new practice at Accenture dedicated to Digital Transformation. Adweek and Beringer Capital produced a report indicating that 51% of Senior Leadership they surveyed indicated that implementation of Digital Transformation in the next 12 months was a critical objective, while 59% worried they may be already too late!
Consider the blowout quarterly reports of Alphabet, Amazon, and Microsoft announced last week. The WSJ explained them by stating these 3 Big Tech were “…extending their reach in industries from advertising to retail to business software as they drive the economy’s technological transformation.” (emphasis mine). And if one needed any additional signals, consider that pharmacy retailer CVS is actively and not so discretely mulling acquiring insurance company giant Aetna for $66B in order to defend its flanks from an expected entry by Amazon into the pharmacy business. Amazon has not really announced anything yet and $66B could be deployed to pre-empt it anyway, and not by a hot shot tech company with an overvalued stock price but by a major, old line company from an industry not really known for being agile. Mind you, CVS’s market cap ($70B) is slightly above what it is offering for Aetna — so this not your run of the mill M&A, it’s a transformative move.
C. Not just Top Down Imperative.
One of the trending themes during our discussion was “user experience.” Whether it was relating to online purchase of stocks, perfumes, luxury goods, or music — the sense was that users are in charge. Customers’ expectations have changed dramatically. It’s not just “I want to do this online” — the demand of users 15 years ago — or “I want to do this on my iPhone” — the more recent demand. Instead, it’s more “why haven’t you guys broken down silos internally so that this entire process can actually be done and in a snap.” It’s an expectation of what you could call “digital seamlessness,” something that Digital Natives, unencumbered by legacy systems and silos can achieve more naturally. Perhaps that’s the inherent advantage of the Digital Natives — they focus on UX first, and the tech adapts — easy to do when you don’t have sunk costs in a tech stack.
Everyone in the room seemed to share the view that there was no option but giving the users the UX they demanded. If you did not, you would lose the user immediately, as he or she was but a click away from a competitor that would make it easier to research and transact. The quality of UX would translate into metrics that anyone could see — visits and conversions — so that any shortcoming would be immediately apparent.
D. Digital Transformation is a Process.
Kudos to Michael Lawless for explaining with great clarity Accenture’s secret sauce for Digital Transformation. I will likely not do it proper justice by saying “it’s a process and there is no one size fits all.” Clearly, talking about Digital Transformation requires putting the emphasis on the word Transformation. Shareholders, board and executives have learned that “we need a web site”, then “we need a mobile app,” then “we need to go Social”, and so on and on with more digital channels and platforms. Now, it seems, perhaps as Jim Cooper was alluding to, that a tipping point has been reached and that people understand that this avalanche of technology is not going to stop. Executives and Boards need to stop and think: what need do we fulfill, are we optimally set up to meet that need in a way that gives us a chance to retain our customers and employees and create shareholder value, and, if not, how do we to transform, if possible, to remain relevant.
Michael explained the process as a search throughout the value chain of a business for opportunities to introduce a new technology with its attendant business processes to transform the business. That point for the injection of new DNA (my words) can be anywhere along the value chain — the customer facing segment of the value chain, or anywhere upstream. Always look for ways to leverage existing assets to offer new services, or old services in new ways.
E. People and Process are Key, so are Proper Incentives.
Lest the focus be overly on the technology, the importance of business processes and human capital was emphasized by many NetForum participants. Complete new processes need to be invented in parallel to old processes that are required to keep the existing products and services afloat. People need to learn new skills, while they are already scrambling to do their existing job. Michael noted that sometimes a new digital team will be set up as a separate team and then might be merged with a legacy business unit. Jim mentioned the interesting experiments being set up in incubators and in other types of collaborative set ups to allow Digital Natives to work with or even inside large incumbents.
Again, in my view, this is a major difference between legacy companies and Digital Natives. Legacy companies expect their employees to do some pretty neat magic: keep the train going on track, while replacing the old locomotive with a new one that is untested. Digital Natives may have an easier task since they are “only” required to build a new locomotive to run on newer tracks.
This vastly different set of expectations between the work forces of incumbents and Digital Natives was emphasized by several participants who were currently or previously (before jumping over to Digital Natives!) responsible for revenue generation for major incumbents. They pointed out the need to align incentives and compensation with the desire to achieve Digital Transformation. In other words, how much revenue or profitability today are shareholders willing to sacrifice in order to achieve Digital Transformation tomorrow? It’s not clear that all shareholders care about Digital Transformation — it is the prerogative of shareholders to choose cash today, even it requires cutting into the muscle of a business, as opposed to investing today and hoping that their company will successfully transform within their investment horizon. So, as we criticize management teams with failing to keep up with the Digital Natives, it is important to remember that management policies may be dictated by shareholder portfolio preferences.
I wish to thank all those who participated in this NetForum and hope those of you who did not attend will find this Key Learnings informative and useful.