Despite plenty of experimentation with digitising customer experiences through mobile applications and websites, few companies have made the leap to digitising business strategy. Digitising strategy demands executives know the answers to this question: "How will we use digital to change how we create value for our customers in the future?" Not surprisingly, just 26% of executives feel confident that their company fully understands the potential for digital to change the business model in this way.
Executives embracing such digital thinking are evolving their companies to become digital predators, while their more conservative peers are destined to preside over digital prey. But even with the right leadership, few companies have the right people, culture, and technology to execute digital transformation. And CIOs working in isolation cannot close these gaps - instead, CIOs must partner with CMOs, business unit leaders, and other executives to help the CEO build digital capabilities across the business. Failure to address these gaps will doom most strategies to failure before they begin.
A bolt-on strategy is not enough to become a digital predator
Many companies are already experimenting with digital to improve customer experiences. Some 48% of companies have some kind of bolt-on augmentation strategy for digital, where they apply new digital assets such as ecommerce or mobile apps over the top of the existing products and services without disrupting the business model. When well-executed, these digital strategies have a significant impact on customer experience and perceptions of value and can help boost sales of the core products and services.
But to maximise future revenues as a predator, your company must push digital into the heart of the customer value equation, using digital to create new sources of customer value and revenue. This kind of transformative digital strategy often disrupts existing business profit-and-loss (P&L) structures and has the potential to reshape the business from the outside in.
Becoming a digital predator requires a platform of digital capabilities
Executives cite multiple success factors in digital transformation, each dependent upon others. For example, delivering a superior experience for customers (64%) and creating new sources of customer value (61%) both depend upon the ability of the company to protect customer data from security breaches because a lack of security around sensitive customer data erodes customer trust and decreases perceptions of brand and product value. Consequently, 68% of executives agreed that security is very important in determining future success as a digital business. Designing a digital business strategy without a strong platform of digital business capabilities across the enterprise decreases the likelihood of success.
To succeed in transforming to a digital business Forrester identified a number of success factors – three of them are sampled here:
1. Clear executive leadership
Because transformative digital disrupts today's business, potentially cannibalizing existing P&Ls, it's important that the CEO sets a clear vision for the future as a digital business. What does this mean in practical terms? When your CEO sees how digital can drive new revenue, he or she also understands that it may be at the expense of existing revenue streams; this requires the CEO to reset performance expectations with business unit leaders and shareholders. Some 60% of executives report that their CEO is responsible for setting the vision, but just 26% report that the CEO sets a clear vision for their company as a digital business, suggesting most CEOs have yet to grasp the potential for digital to change their business.
2. Exude a digital culture
Half of all executives agree that the culture of the company is important to its success as a digital business. But Forrester's research suggests that digital predators are much more likely to view culture as critically important to their survival. These companies depend on having the right culture to guide employees every day; with 60% of executives in predators report having the right culture in place to succeed as a digital business, compared with just 19% of digital laggards. Culture is shaped from the top down, once again putting CEOs and the c-suite in the spotlight
3. Employees must know their metrics
Employees connect to the culture through the metrics used to measure their success: Metrics are a proxy for what matters most to senior management. But the measurement of success varies widely between marketing, tech management, and business unit leaders. This creates conflict and confusion in your business as employees grapple with trying to work together toward customer outcomes while being measured on completely different success metrics. CIOs need to align their team's metrics to those of business-unit leaders.
Nigel Fenwick is vice president and principal analyst at Forrester Research