Digital transformations offer organizations a pathway to enhance customer experiences, creating a competitive edge in an expanding digital landscape. To accomplish this, understanding and anticipating customers’ needs is paramount. While digital transformation projects deliver immense benefits, they also come with costs beyond financial considerations. These include employee training, disruptions in existing workflows and additional cybersecurity needs. Understanding these costs is essential for organizations that adopt and implement digital transformations to make informed decisions and maximize the long-term value of these initiatives.
The Value of Digital Transformations
Digital strategies are no longer luxury projects; they are mandatory to remaining competitive in an increasingly digital world. The COVID-19 pandemic only accelerated the push for organizations to provide robust digital offerings. A McKinsey survey found that between December 2019 and July 2020, the average share of digital customer interactions rose from 36 to 58% globally. In North America, they increased from 41 to 64%. According to a survey from WNS and Corinium Intelligence, 90% of the companies that were slow to adapt to the pandemic’s digital landscape reported losing business.
In the past, organizations could launch new products for desktop users and add mobile applications later. With the growth of the Internet of Things (IoT), it is vital for features to function on other devices out of the box. More companies are adopting digital-first strategies, placing digital technologies at the forefront of their business strategies, including digital marketing, e-commerce and digital customer service.
Designing Customer-Centric Programs
Today’s customers expect quality digital projects and services that integrate seamlessly with their lives. Effective digital transformation projects that center on customer success keep companies competitive and customers engaged while providing real, tangible business benefits. A Deloitte report on customer-centric digital transformations found that loyal customers spend 67% more than new ones, and 83% of customers with a positive experience would provide a referral if asked.
When used effectively, digital transformations help companies predict problems and drive future behavior by leveraging customer data. Customer segmentation, or creating groups of customers based on specific characteristics, preferences or behaviors, helps organizations use their data more effectively and efficiently while creating increasingly personalized customer experiences.
Amazon is renowned for its customer-centric approach to digital transformation. Utilizing advanced technologies like machine learning (ML) and artificial intelligence (AI) personalizes recommendations and streamlines ordering with one-click purchasing and Alexa-powered devices. Additionally, these technologies help optimize supply chains, and assist companies with continuously innovating to meet changing customer expectations.
Understanding customer behaviors and needs to make data-based strategic decisions is crucial. Predictive analytics tools such as ML can use current and past behavior data to predict future activity. Customer feedback and usage data can spur innovation by revealing opportunities to improve existing products or inspire new ones, helping businesses target sales efforts and identify potential churn.
Netflix used many of these strategies to transform from a mail-order DVD rental service to a streaming behemoth. The company leveraged its data to recommend titles based on past viewing behavior, pioneered the concept of “binge-watching,” and was the first streaming service to produce its original content.
Successful digital-first strategies consider the entire customer journey. It’s vital that customers receive an integrated, seamless online and offline experience through pre-and post-purchase experiences. Chatbots and AI tools offer cost-effective ways for companies to provide round-the-clock customer service. Customers now have multiple ways to pay at check-out, including installment plans. Real-time inventory management is another key to creating a unified and satisfying customer experience.
Addressing Costs
When planning for digital transformation, business leaders must balance hard and soft costs with customer value and expectations. As digital strategies become more central to business success, investing in cybersecurity has become a key requirement. Meanwhile, a shortage of skilled cybersecurity professionals challenges many organizations. Despite the associated costs, it is crucial for organizations to invest in robust cybersecurity measures and continuous monitoring to avoid costly regulatory fines, prevent breaches, and maintain customer confidence. Additionally, digital transformation demands an inclusive and collaborative work environment to attract talent while upskilling and retraining current employees.
Costs associated with activating, implementing and maintaining new technologies, including software, hardware, cloud services and other digital tools, also need to be considered. With a thorough understanding of ROI, leadership can make informed decisions about which tools are necessary to achieve the organization’s long-term goals.
A thorough strategic plan allows leadership to guide the transformation process and address potential expenses. A deep knowledge and understanding of the organization’s overarching goals can help identify the necessary technologies and use cases. It’s important to adopt a phased approach to any digital transformation to manage expenditures and reduce the risk of interruptions to current operations. By prioritizing steps and initiatives in the plan, potential impacts can be understood and mitigated. Even the most well-thought-out plans must be flexible, so that unpredicted challenges or changes do not derail the entire project.
Continuous Monitoring and Evaluation
An organization’s commitment to a digital-first approach should be ongoing and evolving. Leadership plays a vital role in fostering a culture of agility and continuous learning. Achieving successful digital transformations requires strong and committed leadership, a willingness to invest in talent and a long-term approach to the organization’s digital strategy.
Research from Deloitte identifies “low cultural readiness” as a significant barrier to successful digital transformations, defining it as “bureaucratic, reactive, and risk-averse ways of working that are at odds with the collaborative, proactive learning mindset needed for ambitious transformation.” Creating a culture of continuous learning and a willingness to fail fast are vital factors to future-proofing any organization.
Building agility and flexibility into digital strategies is essential as the technological landscape evolves. With vast amounts of information available to consumers and organizations, it is essential for businesses to focus on an agile and cost-effective digital transformation strategy that addresses consumers’ ever-evolving needs and expectations while efficiently guiding them toward solutions.
Measuring the ROI of digital transformation is no easy task. Still, organizations that start by understanding customer needs and then work backward will create meaningful innovation, which is the foundation of success in a dynamic marketplace.
