DIGITAL: ARE FIRMS USING IT TO SOLVE THE PROBLEMS OF TODAY OR BUILD FOR TOMORROW? Authored by: Matt Hopgood, Vice President, Sapient Global Markets Contributors: Laurie Thompson, Sr. Manager Business Consulting, SapientNitro Chris Willis, Director, Digital Transformation, SapientNitro June 2015 1
DIGITAL: ARE YOU USING IT TO SOLVE THE PROBLEMS OF TODAY OR BUILD FOR TOMORROW? 2 DIGITAL: ARE YOU USING IT TO SOLVE THE PROBLEMS OF TODAY OR BUILD FOR TOMORROW? 2
TABLE OF CONTENTS The Change Imperative 4 Understanding the Transformation Imperative 5 Beyond Change Management 6 Digital Transformation Value Chain 8 Aligning Digital Investments with Long-term Goals 10 From Theory to Practice 11 3
THE CHANGE IMPERATIVE Digital initiatives vs. digital transformation: One can help an organization address a host of short-term challenges, such as nurturing stronger customer relationships, fueling back-office efficiency or deploying disruptive technologies to create new revenue streams. The other can help reshape the organization for greater agility, transparency and advocacy positioning it not only for today s challenges and opportunities, but also for market changes, competitive threats and customer needs that have yet to take shape. Today most organizations are investing in digital initiatives projects designed to correct a tactical deficit within a certain segment of the business. For example, a digital initiative might help in unifying and enhancing the customer experience through back-end data integration and a new digital front end. Another might focus on plugging innovative technology data analytics or agile delivery frameworks into the IT infrastructure. Other, more strategic digital initiatives may start at the top, defining new operating models or segment strategies for today s digital era. Those and similar initiatives represent important work in improving business performance. But given the degree and rate of market change, digital initiatives may not be enough. In today s highly dynamic environment, success comes not from plugging individual holes in a firm s strategy, operations or customer experience. Success ultimately hinges on the ability to digitally transform weaving together complex, cross-business initiatives that span traditional sales, marketing, operations and technology functions while driving the firm s people and culture forward. Such transformation leaves a business fitter and far better equipped to keep pace with dynamic markets, customers and competitors. It makes a business much more attractive to prospective employees creating a hotbed for talent and growth. And it positions all parts of the organization for improved agility (operations), transparency (business intelligence) and advocacy (marketing). True digital transformation is nothing if not difficult. However, it is possible and increasingly necessary in the face of accelerating market change (see Figure 1). Change is dramatic, disruptive and relentless. It is no longer sufficient to keep pace with each new innovation; change drivers now overlap compounding complexity as well as opportunities. In addition to technical and digital drivers, organizations face a host of other changes: evolving market regulations, new entrants, shifting social attitudes, cultures, changing demographics and the battle for talent. The bottom line? The baseline operating conditions in most markets have significantly changed and will continue to do so. As a result, firms need to understand and improve their ability to adapt. 1. Accelerating market change High Degree of change Low (A) (B) Phase intervals (C) (D) (E) Market change Market Drivers are accelerating the degree of change as well as the interval of change Time Market Change Drivers: (A) Pre-internet (B) Internet (C) Social/Mobile Internet (D) Millennials (E) New regulations These represent a sample set of change drivers for a particular market and will vary by market. 4 DIGITAL: ARE YOU USING IT TO SOLVE THE PROBLEMS OF TODAY OR BUILD FOR TOMORROW?
UNDERSTANDING THE TRANSFORMATION IMPERATIVE Think about the rapid pace of technological innovation, the fickle nature of today s connected consumers and the perpetual disruption caused by innovators from Facebook to Airbnb. Conditions are always changing. Businesses that did not exist five years ago are shaking well-established industries; at the same time, Apple has not invented a single product that it has taken to market since 2001. In other words, it doesn t really matter what the next disruptor is or how long it reigns as a trend. What matters is who will be best positioned to capitalize on such innovations. As Apple has shown, success is not always being first to market. It is about being best to market, with the agility, transparency and advocacy required to execute and evolve. Consider, too, that through the early stages of the Internet bubble, we saw a clear division between fully digital startups and traditional brick-and-mortar firms that were simply adding new digital channels to their media and distribution mix. The last decade has brought a wholesale embracing of digital across all businesses not only as a communications channel, but also as a vehicle for sales, operations, loyalty and fulfillment. While the scale of such organizational change has been substantial, in many ways the past decade still reflects an evolutionary stage. Digital channels were additive not entirely transformative. Fundamentally, the underlying business models didn t change. Are today s organizations positioned to seize opportunities and create value from ever-changing technological, consumer and cultural trends? Many firms have a growing change gap, or Transformation Imperative, between market change and their ability to anticipate and respond to it. With their additive effect (more channels, more complex products and services, new forms of execution without fundamental organizational and cultural change), digital initiatives often drive up complexity and hinder agility reducing speed to market and increasing cost. Change is dramatic, disruptive and relentless. It is no longer sufficient to keep pace with each new innovation; change drivers now overlap compounding complexity as well as opportunities. 2. Transformation Imperative High Degree of change Phase intervals Market change As market change accelerates there opens up a gap between the current market expectations and an organization s ability and agility to meet them. This gap is the organization's Transformation Imperative. Organizational change ability Low Time 5
BEYOND CHANGE MANAGEMENT Few organizations would object to the notion that market change is outpacing their ability to adjust. To better understand their Transformation Imperative and to create a measure, or index, of this change gap, firms must address these key questions: What is the pace of the market? Consider customer churn, market entrants, price stability, regulatory environment, innovation maturity, market movement, consolidation, dominance of current players and barriers to entry for potential new ones. What is the pace at which the organization can change? What is the gap against market change? Is the business converging or diverging with this pace of market change? Is the firm s leadership able to articulate a clear vision to both internal and external audiences? Many organizations seek to avoid more classically shaped change management projects and thus may not always examine these questions. Given the recent reputation of change management, it isn t hard to understand why. Historically, managing change consisted of adding some training and communication activities to individual initiatives and projects. The focus of change was techniques to get people to adopt new technology with the least amount of resistance. However, developments in technology meant an increased speed and scope of change, which also increased the complexity of change required across an organization. Meanwhile, project management techniques didn t account for basic human needs, the influence of people and culture and the increased impact of these more complex projects and technologies on the broader organization beyond the remit of the original project. As a result, being aware of a change and how to use a new system did more often than not, not equal a lasting shift in behavior. This lack of cultural shift is bearable in organizations that have largely been delivering efficiency and effectiveness initiatives within their current operating model. In today s world, where digital transformation is reinventing business models, cultural and behavioral change is of paramount importance and influence. The complexity is greater and therefore requires even more attention to people and culture. Without that focus, an organization will find it extremely difficult to successfully leverage new technologies, let alone adapt and respond to events now and in the future in technology, customer expectations and markets. To close the change gap, the aim needs to be agility, transparency and advocacy including the advocacy of the people within an organization. What s more, firms must be both mindful of the market and internally transparent to provide the right transformation focus. 1 Beyond Change Management: How to Achieve Breakthrough Results Through Conscious Change Leadership (Google ebook), Dean and Linda Ackerman Anderson. John Wiley & Sons, 26 Oct 2010, pp 44-45. 6 DIGITAL: ARE YOU USING IT TO SOLVE THE PROBLEMS OF TODAY OR BUILD FOR TOMORROW?
3. The risk of digital initiatives versus digital transformation Digital initiatives will predominately uplift to current market conditions. High Degree of change 1 2 Their impact will either put the organization close to meeting or exceeding (briefly) market conditions. While the digital initiative has lifted the change curve, it has not changed its path, or gradient. The underlying organization is still diverging from the market change curve. Low Time Typically focused on addressing a digital market or competitive deficits (fragmented customer journeys across channels, for example), these digital initiatives will provide a clear uplift toward a market change. The concern doesn t involve the scope of a digital initiative in addressing clear market and/or competitive deficits; rather, firms must understand the initiative s impact on the organization s change curve. In other words: How much did the initiative narrow the Transformation Index? If the answer is that the organization s core agility, transparency and advocacy remain unchanged, then any competitive advantage will be short lived. What s more, any remaining deficit will quickly continue to diverge from the market change curve. To close the change gap, the aim needs to be agility, transparency and advocacy including the advocacy of the people within an organization to provide the right transformation focus. 7
DIGITAL TRANSFORMATION VALUE CHAIN Digital initiatives can provide stopgap measures to help firms track, or temporarily outpace, the market and their competitors. Digital transformation is more sustainable increasing a firm s ability to effectively anticipate and respond to virtually any drivers of change (see Figure 4). 4. Digital transformation value chain Market drivers Competition Regulation Cost/revenue Customers Technology Digital themes Agility Transparency Advocacy Digital enablers People Data Technology Channels Products/service Solution areas Digital Strategy Product & service design and distribution Organization, operations and culture Analytics Brand, marketing & experience Technology platforms (Data) 8 DIGITAL: ARE YOU USING IT TO SOLVE THE PROBLEMS OF TODAY OR BUILD FOR TOMORROW?
Drivers Despite the incredible rate and pace of change in the market, these fundamental drivers remain unchanged: Competitive pressures Regulatory change Cost and revenue pressures Changing customer expectations Technical disruption These will always be the forces requiring firms to change their business. Themes For survival and to stay ahead of those drivers sustainable transformation requires firms to focus on three macro themes: Agility. This is about execution the speed at which firms can adjust the way they service customers and run their operations. Transparency. This is the organization s business transparency and business intelligence its ability to meet external (regulatory and customer) demands as well as internal needs for metrics about the business. This intelligence is crucial not only to addressing compliance but also to supporting cost-cutting programs, understanding revenues and identifying trends. Advocacy. This is the focus on customers and employees a firm s investments in enhancing customer experience and nurturing strong relationships with the brand. It also speaks to how a firm drives advocacy and support for internal change. This may include an omnichannel strategy for delivering a seamless experience no matter how customers engage. Enablers Though not an exhaustive list, typical building blocks of digital transformation include: Data. More effective data creation, collation and analysis will drive a step change in value and that s true whether firms are managing internal operations, crossselling or delivering a better customer experience. Technology. Better use of existing company technology or implementation of emerging solutions will support cost savings and/or competitive advantage. Channels. Integrating channels, particularly with a digital spine, can streamline customer support costs while strengthening the brand experience. Products and Service. A focus on creating new digital products or service channels can drive sales, build advocacy and increase market share. People. Ensuring the right people, right skill-sets and right culture are in place to foster transformation. Having the right people strategy is critical to the success of any digital transformation. Consider the various digital initiatives underway within an organization. Do they address those themes? Do they bring together the enablers? Above all, do they leave the business with greater agility, transparency and advocacy for staying ahead of ever-changing drivers? If the answer is no, the firm may be managing digital initiatives rather than fueling digital transformation. 9
ALIGNING DIGITAL INVESTMENTS WITH LONG-TERM GOALS Are Firms Running an Initiative or Spearheading a Transformation? Is the program delivering systems or processes that provide more timely and accurate business intelligence for customer insights, competitive intelligence, marketing effectiveness, manufacturing efficiency and the emerging technology landscape? Has the program delivered a clear owner and governance model across the business, supporting transparency and continuous orchestration across the portfolio of change initiatives? Is there a defined innovation and/or research and development function whose energies are aligned with the transformation program and overarching digital strategy? Is there a core cultural and values framework across people and processes that supports continuous change without sacrificing the company s ethos? Do employees accept positive change and see it as an enabler for continued commercial success and relevancy? Are there programs, procedures and investments in place to create and sustain this view? Once firms understand their market change curve, organizational change gap and current capacity for agility, they can better direct their digital transformation investments: Firms that are tracking to or leading the market over sustained time periods may want to focus investments on advocacy extending and reinforcing their leadership position. Organizations that have fallen away a bit may want to invest to deliver more timely business intelligence into opportunities and threats to move close to the market. Finally, those firms that are away from the market curve and falling should make immediate investments in both transparency (through better business intelligence) and agility with a focus on the latter. Ultimately, every sustainable digital transformation program balances the themes of agility, transparency and advocacy delivering an organization that embraces change as business as usual, and that strives for sustainable, long-term change rather than stopgap solutions to shorter-term market forces or competitive threats. Is the firm reviewing the skill-sets and capabilities within the organization and aligning these to future ways of working and operational aspirations? Is there an internal function and/or external partner that can help drive change across business functions and solution areas (without regard for politics or legacy)? Does the firm maintain performance and risk management metrics through the value chain to monitor progress market and business model change? 10 DIGITAL: ARE YOU USING IT TO SOLVE THE PROBLEMS OF TODAY OR BUILD FOR TOMORROW?
FROM THEORY TO PRACTICE To what extent is your organization driving digital transformation? Firms that conduct a formal assessment of their organization s Transformation Index are better able to identify relative strengths and weaknesses. This gives them the information they need to prioritize agility, transparency and advocacy efforts going forward. Our proven approach assesses firms across seven broad categories each of which represents a core enabler, or hindrance, to narrowing the Transformation Index. A thorough assessment of each will reveal strengths as well as risks when it comes to managing change: Digital strategy measuring the maturity of your digital strategy, its relationship and integration with other business strategies in play, as well as your traction with senior leadership and ability to articulate the digital strategy throughout the organization. Brand, marketing and experience measuring the connection to your customers, the effectiveness of your storytelling across brand touch points and the sophistication and completeness of your channel strategies (such as mobile and social). Product, service design and distribution assessing the maturity of your product management function and any product strategies and roadmaps; the quality of market and client insight data feeding into product and service strategy; the inclusiveness of your service and experience vision across digital and physical channels; and the ability to manage a product and service holistically across distribution channels. Technology platforms (including data) diving into legacy systems; assessing more agile technology platforms, methods, structures and systems, such as service-oriented architecture (SOA); auditing across application stacks; and reviewing data governance and data architecture. Change management assessing the maturity of your existing internal change management capability, including portfolio management across the enterprise, the ability to align key performance indicators (KPIs) and the success of managing siloed dependencies and risk. (Key to success here: an experienced stakeholder or sponsor who can choreograph change and drive the vision across the various corporate functions.) Business intelligence (advocacy) evaluating your business intelligence, which is crucial to digital transformation. Without high-quality, confident business intelligence, transformation can quickly devolve into initiatives focused on simple market advances and/or competitive advantage. This organizational deep dive will reveal your company s responsiveness to identifying, embracing and delivering change across at least three of the assessment categories just described. Culture, organization and operations design and leadership looking at the longevity and complexity of your existing governance systems and business processes, as well as analyzing flexibility and capability in skills and culture to deliver and accept change. 11
AUTHOR Matt Hopgood is a Vice President based in London and co-leads Sapient Global Markets Visualization practice. Matt has a background in business and digital strategy, creative and commercial leadership, web/application support, user-centered design (UCD), information architecture and content management. Recently, Matt has worked on P&L apps for energy majors, collaboration tools for market data providers, collateral management for a central bank, risk, balance sheet substantiation and mobile strategy for investment banks. CONTRIBUTORS Laurie Thompson is a Senior Manager in Business Consulting with SapientNitro based out of the firm s London office. Laurie has over 15 years of experience as a business consultant. She has contributed to the design of digital organization capabilities, business model and business case development, business transformation planning, has performed business process development and implementation, stakeholder management, internal communications planning and delivery, and development and delivery of Learning & Development programs. Laurie has worked with clients in several different industries, including charity, travel, automotive, Fast Moving Consumer Goods (FMCG), public sector healthcare, communications, high tech and retail. Chris Willis is a Director with SapientNitro based in the firm s London office with over 16 years of digital experience across a range of leading FTSE companies and the UK s leading experience/digital consultancies. He has undertaken key roles covering transformation, strategy, functional management, organization design and development, operations and full project lifecycle management across people, process and technology initiatives. Chris has firsthand experience in a number of transformation programs, such as M&A strategy, performance optimization and commercial survival. 2015 Sapient Corporation. Trademark Information: Sapient and the Sapient logo are trademarks or registered trademarks of Sapient Corporation or its subsidiaries in the U.S. and other countries. All other trade names are trademarks or registered trademarks of their respective holders. Sapient is not regulated by any legal, compliance or financial regulatory authority or body. You remain solely responsible for obtaining independent legal, compliance and financial advice in respect of the Services. 12 DIGITAL: ARE YOU USING IT TO SOLVE THE PROBLEMS OF TODAY OR BUILD FOR TOMORROW?
ABOUT SAPIENT GLOBAL MARKETS Sapient Global Markets, a part of Publicis.Sapient, is a leading provider of services to today s evolving financial and commodity markets. We provide a full range of capabilities to help our clients grow and enhance their businesses, create robust and transparent infrastructure, manage operating costs, and foster innovation throughout their organizations. We offer services across Advisory, Analytics, Technology, and Process, as well as unique methodologies in program management, technology development, and process outsourcing. Sapient Global Markets operates in key financial and commodity centers worldwide, including Boston, Calgary, Chicago, Düsseldorf, Frankfurt, Houston, London, Los Angeles, Milan, New York, Singapore, Washington D.C. and Zürich, as well as in large technology development and operations outsourcing centers in Bangalore, Delhi, and Noida, India. For more information, visit sapientglobalmarkets.com. 13
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