Rapidly changing consumer behavior + Rapidly improving technology (5G, ML, AI, AR) = Digital Transformation
In 2003, Facebook didn’t exist. The mobile smartphone didn’t exist. There were just 800M global internet users.
Since then, we’ve shifted into the digital age. Today, there are almost 4 bln Internet users. More 1.8+ bln people are on Facebook alone.
And it is not just about consumers. It’s also technology. Think about 200+ billion devices from sensors to machines all connected to the Internet. We are well on the way to that future. And think about the pace. In the 60 seconds to read this paragraph, there will be 300,000+ snapchats, 2.5+ million Google searches and 200+ million emails sent.
What does all of that mean for enterprise IT, consumer IT and the businesses? First, it is a connected world and everything that can be connected will be connected. Second, data is the currency of the new economy much like energy and natural resources in the industrial economy. And third, businesses and IT will be intelligent – marked by highly automated processes, robotics and AI. In other words, business is changing like it never has before.
Digital has unleashed a new renaissance of creativity and opportunity, it has also lead to an explosion of channels, technology platforms, and new capabilities all seeking management attention. Given the tsunami of change, how do you make sense of it all as an investor, analyst, manager, executive or entrepreneur?
- What is Digital, Digitizing, Digitization and Digitalization?
- What do we mean by Digital Transformation?
- What do we mean by Digital Customer Engagement and Experience?
- What is the Market Opportunity for Digital Customer Engagement and Experience?
- What are other terms for Digital Customer Engagement and Experience?
- What business strategies are corporations targeting around digital customer engagement?
- Why is everyone focused on Digital Customer Engagement and Experience?
- What are the characteristics of a truly engaging digital customer experience?
- Executing Digital Transformation is management’s #1 challenge today
- What is the evolution of Digital?
What is Digital, Digitizing, Digitization and Digitalization?
Every business is becoming a digital business to deal with the age of the customer (a world of abundant choice and scarce attention). Companies today are rushing to become more digital. It is a time of tremendous digital transformation for the technology industry.
But what does digital really mean? What is the business objective? Can you articulate some of the characteristics ~ sense of urgency, compelling ROI, new sources of revenue ~ of a business initiative that makes it a good digital candidate?
The scope of digital now includes everything from marketing channels to products to technology to people to business models. Broadly speaking, any technology that connects people to people, people to machines, machines to machines, or people with information is digital, which means digital has become essential to every department in every business.
- The simplest definition of digital….. digital represents the collection of channels consumers/customers tend to use to transact, interact, converse, access and self-serve.
- Digitizing is the verb describing a process of raising information quotient and connectedness via a set of technologies (analytics, big data, mobile, cloud, social etc.).
- Digitalization is the transformative process for turning digitized resources into new sources of revenue, growth and operational results.
- Digitization is the process of atoms into bits.
- A digital strategy is a plan (who, what, when, where, and how) to accomplish a business objective (cost reduction, operational improvement, customer service excellence, customer centricity etc.) with the benefit of digital tools (social, mobile, web, etc.).
- Digital transformation is the science of adapting the corporation to the new expectations of the customer. Consumers are more digitally-enabled than ever, and most companies (especially larger ones) have a lot of work to do to go from current state to the target state.
What is Digital Transformation?
Digital Transformation is the use of technology to improve performance or reach of corporation. Digital Transformation (enabled by emerging technologies) is a major trend impacting consumers and businesses alike. The impact will be huge as products, services, processes and business models are becoming more digital and digitally optimized.
In industry after industry, the migration from atoms to bits (physical to digital) has been steady and constant. Take for instance payments. Physical money, whether its checks or cash or credit card, is digitizing rapidly. in 2015, 40% of the money going through wallets is in checks or cash. By the end of 2018 that will go to 25%… Mobile is driving this change. Online commerce represents only $2.5 trillion, or 10%, of the total $24 trillion in commerce worldwide. So there is a lot of growth potential.
Why is so important? Digital shifts power to the consumer…as a result consumers expect personalized experiences and access anywhere and anytime. This power shift to consumers is accelerating with mobile and social media. Social impact on people’s shopping and buying/referral activity is rising fast.
Digital Transformation is the focal point for corporate strategies everywhere. No sector or organization is immune from the digital phenomenon, which is now the focal point of the management agenda. The question is no longer when companies need to make digital a strategic priority – this tipping point is past – but how to embrace it and turn it to competitive advantage.
Digital transformation (or digital disruptive forces) are a key concern for the CEO and C-Suite. However, digital transformation is not easy. Customers are fickle and hard to target. Emerging technology is moving fast. Transforming legacy technology is complicated. Business and technology silo’s make it difficult to align. All opportunities for digital systems integrators like Liquidhub.
Figure 1: Core Themes in Digital Transformation
What is Digital Customer Engagement?
Digital Customer Engagement is a emerging marketing, sales and service model that deploys technology (Social, Mobile, Analytics, Cloud and Internet of Things) to achieve both “Customer Intimacy” and Scale (in some cases millions of customer interactions across numerous touchpoints).
Digital customer engagement is about a “hyper” customer centric approach. The web is increasingly the primary channel for conducting our businesses and even managing our own lives. The web has also evolved to include new channels like mobile and social, and interactive and on-the-go online experiences are now part of our everyday lives. More information is available to people online, and in an increasing variety of digital formats.
These “consumerization” forces come together to create customers who have more choices than ever before, more influence than ever before, and greater control over their relationships with brands (and institutions) than ever before. And while this so called customer experience revolution has been great for consumers, this new environment poses many challenges for businesses when it comes to engaging and connecting with their customers (and employees). To be successful in this next generation environment, it’s essential for businesses to focus on delivering engaging customer experiences and new interaction models that drive sales and long term loyalty.
We are at the middle of a seismic shift in the relationship and connections between and among people, apps, companies and data. As a result… the customer engagement crisis is taking center stage. Because of over-stimulated customers, it’s harder than ever to create and sustain engagement with consumers and employees. Companies need new strategies (that we call digital customer engagement) that can make the product, service, channel or business process more engaging, fun, sticky and viral.
Transactions are migrating to digital channels. Here is an illustrative example from JP Morgan Chase that shows the year over year growth in mobile banking.
What are other terms for Digital Customer Engagement?
The following are different “buzzwords” used by different clients or industries but are mostly the same concepts/ideas. Let’s play some “Buzzword Bingo”
- Cross/Multi channel Experience
- Cross/Multi touchpoint experience
- Bridge Experiences
- Customer experience
- Digital Customer Experience
- Digital Customer Engagement
- Omni-channel Engagement
- Customer experience management
- Customer relationship management
- Customer management
- Total Customer Experience
- Experience Design
- Service Digitization Design
- Digital media… Second-screen Engagement, Over the Top Networks
The challenge for managers and leadership in most organizations is sense-making. How to organize all these innovations into a meaningful stream of execution.
What is the Market Opportunity for Digital Customer Engagement?
Companies are not prepared for consumerization or digital engagement shift. We believe that demand for our services is fueled by the following trends:
- Increasing focus on the customer experience to sustain competitive advantage.
- The ability to sustain a competitive advantage based on price or product differentiation has significantly narrowed given the speed of technological innovation.
- As customers become more connected and widely broadcast their experiences across a variety of social networking channels, the quality of the experience is having a profound impact on brand loyalty and business performance.
- We believe customers are increasingly shaping their attitudes, behaviors and willingness to recommend or stay with a brand on the totality of their experience, including not only the superiority of the product or service but more importantly on the quality of their ongoing service interactions.
- Given the strong correlation between high customer satisfaction and improved profitability, we believe more companies are increasingly focused on selecting third-party partners, such as LiquidHub, who can deliver a data-driven, fully-integrated solution that increases the lifetime value of each customer relationship versus merely reducing costs.
- Increasing percentage of companies consolidating their customer experience requirements with the most capable partners who can deliver measurable business outcomes by offering afully-integrated, technology-rich solution.
- The proliferation of mobile technologies and devices along with customers’ increased access to information and heightened expectations are driving the need for companies to implement enabling technologies that ensure customers have the best experience regardless of the device, location or media they choose.
- These two-way interactions need to be received or delivered seamlessly via the customer channel of choice and include voice, email, chat, SMS text, intelligent self serve, virtual agents and the social web.
- We believe companies will continue to consolidate to third-party partners, such as LiquidHub, who have demonstrated expertise in increasing brand value by delivering a holistic, fully-integrated customer-centric solution that spans strategy to execution versus the time, expense and often failed returns resulting from linking together a series of point solutions from different providers.
- Focus on speed-to-market by companies launching new product or new channels.
- As companies broaden their product offerings and seek to enter new channels, they are looking for partners that can provide speed-to-market while reducing their capital and operating risk.
- Companies are not wired to deliver – they need to transform and re-engineer significant parts of their business.
- Legacy technology is complicated and siloed.
What business strategies are leaders and corporations targeting around digital customer engagement?
According to Gartner, the spend of the CMO in most organizations will be five times that of the CIO. Simply put, you want to be where the money is. Here are some specific strategies corporations are executing around.
- Create meaningful and value-adding conversations with customers and partners in social media and digital era
- Create new interactive portals across web, smartphones and tablets to better engage customers (the rise of the digital phenomenon is changing customers’ habits)
- Creating new digital services that can attract and retain customers
- Increase Cross-sell and Upsell using recommendation engines (next best offer, next best action)
Why is everyone focused on Digital Customer Engagement?
Companies must learn to understand and lead digital customers and markets. Companies need to engage meaningful interactions with customers when (and where) it is relevant to the customer.
Digital matters because it accelerates the rate of business model disruption (e.g., see what Netflix did to Blockbuster’s business model or Amazon.com to Barnes and Noble). Today’s multichannel customers demand better experiences than they get from firms that design underperforming one-off touchpoints. Faced with an expanding ecosystem of legacy websites, mobile sites, and apps, firms need a plan that will help them align their investments with their customers’ most pressing needs.
How can they do this? They can accomplish this by taking a user-centered approach to understanding the needs and behaviors of their multichannel customers and filling in the experience gaps. Firms must develop a road map for improving the effectiveness and cohesiveness of their digital touchpoints.
In the August 2014 global survey report from McKinsey & Company, respondents were asked about five digital-enterprise trends: big data and advanced analytics, digital engagement of customers, digital engagement of employees and external partners, automation, and digital innovation. Customer engagement was the highest-ranked trend, as 56% said digital engagement of customers is at least a Top 10 company priority.
Another rising trend is companies’ use of digital to position material consistently across channels and to make personalized or targeted offers available online. Beyond that, however, the report revealed that companies have slowly adopted digital approaches to engage their own employees, suppliers, and external partners.
Digital usage results in more engaged customers, lower attrition rates and costs. Here is an illustrative example from JP Morgan Chase.
What are the characteristics of a truly engaging Digital Customer Experience?
The Digital Customer Experience is series of events that leads from the first contact to the final conversion. Each event contains a number of Touch points – both mobile, web and physical, that together make a unique impact, and create a User Experience, valuable and useful to both our clients and their customers.
Most companies #1 objective is to simplify the customer’s journey, through all touch points, in order to optimize conversion, cross-sell, up-sell or service. The truly engaging experiences have the following characteristics:
- Relevant…. An engaging digital experience is one that is contextually relevant. Delivering a one-size-fits-all digital customer experience is no longer acceptable or particularly effective. Instead, customers expect companies to know who they are and to understand their preferences, behavior and past relationship with the brand. And they expect companies to demonstrate this by delivering an online experience that is relevant and personalized to their needs.
- Mobile…. The ubiquity of mobile devices means that an engaging digital customer experience is also an increasingly mobile experience. This requires mobile enablement of the web presence, ideally reusing existing web content and sites, reformatted and optimized for delivery to thousands of different mobile smartphones and tablets for anytime, anywhere engagement.
- Connected… the engaging digital customer experience is a connected and consistent experience. Over the course of their relationship with any brand, customers may go online to browse, search, make purchases, or service their accounts and a number of different technologies may be involved in supporting these different types of interaction. The goal should be to create a connected, seamless and consistent customer journey, by integrating the different technologies involved in delivering the customer experience.
- Social…. Social networks like Facebook have changed customers’ expectations in favor of more interactive online experiences. Visitors to every web site expect to participate and contribute on the overall web presence and to also share aspects of that experience with their social networks. Whether through user-generated content like comments, reviews or ratings, the engaging digital customer experience now requires plenty of opportunities for social interaction.
- Solves a need. The digital customer is interacting with a brand to address their need…they don’t care about the channel. They are interested in ease of use, quick and accurate service, product selection, and does the firm know them and reward them. However, companies care about channels because that’s how they tend to be organized. The whole of the experience should be greater than sum of its parts (Easy to articulate this strategy but hard to execute in most large firms).
Executing Digital Transformation?
Management’s #1 challenge today is migrating from traditional to a hybrid (digital/physical) or traditional to pure digital models. Why is this critical?
- Business designs have a finite lifecycle
- Digital Value Migration is inevitable, no business design can stay fixed and survive
- Most companies see Digital Value Migration too late
- Value Migration to digital can be anticipated
- Incumbents are often best positioned to see it . . . if they know what to look for
A digital business uses technology to innovate, capture, and create new sources of growth and value. However, becoming a digital business requires digital transformation, a complex, multi-step process that requires many skillsets — technical, functional, and business skills — to align for success.
Digital is more than cloud, mobile, social or Big Data. This not a technology play. It is about setting a strategy and executing it with emerging technologies, use cases, touchpoints, interactions and flow (basically a digital architecture).
Companies need to create digital strategies and digital customer engagement models based on business case and solid justifications to become consistently successful in digital era. Digital Transformation is also a great opportunity for renewal and value creation.
The best digital customer engagement strategies require superb execution which is why it’s imperative to be working with the right partners as you go to market.
What is the evolution of Digital?
E-Commerce -> E-Business-> Social -> Mobile Commerce -> Data-driven Consumerization -> Wearables (IOT) … there has been steady migration from the traditional ways to digital.
Today, digital is THE engagement layer of all media & channels that allows users to self-select their own experiences, and affords marketers/sales/service the ability to bridge media, gain feedback, iterate their message, and collect relationships.
Anytime. Anywhere. Any device. Any screen. These are not buzzwords anymore. They are reality for most businesses. So everyone is scrambling to refine their digital strategies as value migrates from old models to new digital models. Value shifts over time as new models offer the same benefits to customers but with more convenience and better interfaces. Value migration occurs as both economic and shareholder value flows away from obsolescent (and obsolete) business models.
So how do established companies respond to value migration and change? They have to reinvent themselves with new business models while lower operating costs. This is the essence of digital transformation and digital strategies. A digital strategy is a plan (who, what, when, where, and how) to accomplish a business objective (cost reduction, operational improvement, customer service excellence, customer centricity etc.) with the benefit of digital tools (social, mobile, web, etc.).