Digital transformation changes a company’s operational mechanics along with how it interacts with customers. In The Economist Intelligence Unit’s recent global survey of board and C-suite members and other top executives at more than 600 companies, 70 percent of respondents said their digital strategy increases employee efficiency and productivity while 74 percent noted that it improves their ability to meet customer demands.
Staying competitive, staying successful
Digital transformation goes beyond adjusting specific aspects of a company’s processes and offerings to keep up with the technology revolution. It involves transforming the company organizationally and strategically. Indeed the Enterprisers Project, a collaboration between Harvard Business Review and Red Hat, identifies digital transformation as “a cultural change that requires organizations to continually change the status quo, experiment and get comfortable with failure.”
The Economist Intelligence Unit’s survey findings support this view. Respondents agree that cultural change is necessary to achieve digital transformation (73 percent), that digital transformation is inextricably linked to business transformation (74 percent) and that digital transformation is now a requirement for companies to compete and succeed (80 percent).
Thus far, survey respondents believe digital transformation has had a positive effect. Most respondents say their organization’s digital strategy has produced significantly greater value for stakeholders and a significantly improved return on investment (63 percent), and that it has improved both their competitive positioning (63 percent) and research and development (58 percent).
Centralizing digital transformation
Not every company implements digital transformation at the organizational level right from the start, however. Lloyds Banking Group has committed to investing more than £3 billion in digital and other strategic initiatives over the next three years. But its digital transformation began a decade ago with the creation of a new services platform for its digital customers, according to Zaka Mian, group transformation director.
Subsequently, as customers shifted more of their activities with the bank online, Lloyds directed more of its attention toward creating a great digital experience for customers. “Suddenly, digital expertise was not just about tech tools and channels,” says Mr. Mian, “and the makeup of our team started changing. We had people from a commercial background next to engineers next to people from design agencies.”
Now, the bank, more so than its customers, was powering the digital shift. As Lloyds added more online features, customer online activity increased significantly. “Retail banking was running much further ahead of commercial banking and insurance in this respect,” says Mr. Mian. Aiming to correct the imbalance yet faced with a shortage of skills in some areas, Lloyds created a single digital transformation team at the group level rather than separate teams in each business area. “We ended up being the first UK bank to pull digital out from inside each area and set it up with a single chief digital officer,” Mr. Mian says. “That way, each area can talk about its digital strategy and then roll it up to the whole group.”
“We ended up being the first UK bank to pull digital out from inside each area and set it up with a single chief digital officer.” Zaka Mian, group director of transformation, Lloyds Banking Group
Other companies are making wider organizational changes. Asked to list the three areas that will be most critical to their digital decision-making in the coming year, 38 percent of respondents to our survey cited implementing wider business process and organizational changes that their digital strategy requires — more than any other factor — and 27 percent cited becoming a more data-driven organization. Most companies say they are already aligning business strategy and digital strategy formulation (72 percent).
Focusing on the customer journey
Centralizing digital transformation prompted Lloyds to expand its thinking to the entire customer journey. “Our customers were using our online platforms in a more seamless way — to open a bank account, to research taking out a mortgage — so we started thinking about why we were designing and prioritizing improvements by channel and not according to the end-to-end and multichannel customer journey,” says Mr. Mian.
The answer was to disband the digital transformation team and merge it with technology development and business change teams, creating a new, group-level transformation division. “The term ‘digital’ was becoming unhelpful,” says Mr. Mian. “We wanted to have all people who do change-related work — data scientists, business analysts, product owners, designers, etc. — all in the same cross-functional team.”
Adobe has also worked to improve its ability to understand and anticipate the customer experience through its product development process. In 2016, when it was developing its Adobe XD product for designers, it held an internal “experience-athon” at which product engineers and designers on the XD team watched XD designers execute a task. They quickly identified design issues that needed to be resolved — and quickly got to work on resolving them.
Last year, the Food and Drug Administration announced that it was moving away from a structure that grouped professionals in independent offices based on their area of expertise. Instead, the FDA’s Center for Drug Evaluation and Research is adopting a team-based approach that integrates people from different disciplines and across different stages of the product approval process.
At Lloyds, Mr. Mian says the goal was to align the organization itself with the customer journey and mindset: “We know helping clients borrow money for their business is a key journey, so we start by bringing together colleagues from across the group — relationship managers, branch colleagues, credit risk specialists, designers, engineers — and, importantly, customers to understand the current process and their pain points. The team’s objective is to deliver brilliantly for customers, while also being more efficient, more responsive and faster to market.”
Client teams or branch staff might say “it takes too long for us to get to the phone, that it’s hard to get ten people to sign a single piece of paper for a business loan, so let’s figure out how to do it digitally.” A behavioral psychologist on the team may provide insight into why customers respond to certain signals the way they do. “So the team’s objective is to improve the customer experience,” Mr. Mian says, and digital transformation proceeds from the understanding it has gained of how to do so.
No winners and losers
By including every relevant skill set and every stakeholder within the group on such projects, companies can also avoid common organizational missteps. One is “the white knight who rides in to solve all the problems of the organization — isolating ‘digital’ into one area,” Mr. Mian says. Another potential problem is the departmental tensions that can result when tech units are located within each department and come to feel that “digital belongs to them. Because you need to avoid the pitfall of cultural walls being put up between departments.”
By contrast, Mr. Mian says, Lloyds’s “group-wide Transformation Division is a democracy in which the key is the blending of different skills and great teamwork. It answers the need for cross-functional teams that bring experts together with a mix of skills and experience who can deliver for customers.” The result is “a 360-degree view that percolates into the design stage” and enables Lloyds to move faster in digital. Mr. Mian explains what this means: “We can think about our IT, business and data architecture in more interesting ways. If this is what we’re trying to do strategically with our customers, how does our architecture, in all its guises, mesh with that?”
Cross-training is another tool that facilitates this organizational shift, keeping team members from becoming too isolated within their specific skill sets to work with other members of the team. It also helps to reskill and retrain existing colleagues. All this represents a profound cultural transformation that can sometimes be contentious. What Lloyds has learned is that “it has to be approached holistically,” says Mr. Mian. “You need to impress on everyone that there are no winners and losers. Digital affects everybody in the organization.”