Based on the nine pillars of digital transformation and the product transformation framework that I developed a while ago, I thought how to make this more operative and applicable for companies and transformation managers.
Digital transformation is not a trend or a specific phase of a company’s evolution. Much more a clear understanding of the meaning and an implementation into the company’s DNA is an essential premise to make relevant business in the future.
Since 2005, I am working in environments of permanent and ongoing transformation: Transformation from offline software to online services, transformation of digital products to the next level, transformation of business models and complete industries.
In the last three years I had the luck to be active part of a huge transformation journey that is including products, organization and brand of a German media company called WELT. At the same time the whole media industry is facing massive challenges through changes in media consumption behavior driven by free online news content, instant access via mobile devices and domination of Facebook and Google in user’s time spent. That is accelerating a need for transformation especially for those media company that are still depending on a successful, but shrinking offline business. Ten years ago online business was somehow seen as a nice add-on for the classical offline business such as newspapers. Today the challenge is how to finance a whole media organization primary with digital revenues while the revenues from offline business are under pressure.
Axel Springer is a great example how to drive radical digital change successfully without leaving the core values of their brands and organization. In 2007, below 10% of Axel Springer’s revenues came from digital businesses, in 2013, the share of digital revenues exceeded 50% for the first time. In 2016, the share of digital revenues was 67%.
It is always helpful to take a look at some of the famous US success stories. How did Netflix and Amazon Prime successfully take over the business from classical video rental shops?
First of all, online video isn’t new. YouTube started in 2005. In May 2011, already 48 hours of videos were uploaded every minute to the platform. In February 2017, this increased to 400 hours and 1 billion hours were watched every day. YouTube started as free platform for user generated content, in 2010, they begun free streaming of certain premium content. In 2013, YouTube offered the ability to charge a $0,99 subscription fee/month for channel providers. But the most video content on YouTube was and is still free and there was only a very limited amount of premium movie content available. Netflix, founded in 1997 and Lovefilms, founded in 2003 (in 2011 acquired by Amazon and later merged into Amazon Prime Video) were both starting with an online DVD rental service. Building up a large online customer base it was more a technical challenge how and when to switch the business to a video-on-demand streaming service.
The key driver of their success was the changing user behavior and user preferences combined with high-speed internet availability and “cheap” devices with the technological abilities to play streaming content. So an online streaming service was addressing a need that conventional video rental shops couldn’t serve: Easy instant access to premium movie content with the freedom to decide when to watch what. And the offer had a reasonable pricing compared to the offline model including a monthly subscription fee.
When user behavior and preferences are changing, new competitors rise and might address the change better as established companies from that specific market. If this happens whole industries and businesses can be disrupted, e.g. the music industry (from CD to MP3 to streaming) or even the small butchery around the corner in the late 80s when the big supermarket chains rose.
So companies’ user centricity as a clear understanding how preferences of their customers evolve and change is core to drive any business transformation. Based on my experience I identified nine important tasks that help to implement a customer centric strategy as driver seat of a digital transformation process.
The nine tasks are related to three areas: (1) people, (2) organization and (3) tools. People means the employees and managers that are going through the transformation and are shaping the process. The organization is giving the evolving frame for the ongoing transformation process, the tools are supporting and accelerating the successful realization of each single transformation step.
Create a vision based JOINT MINDSET
Similar to what I have described as “mindset of change” in my article about digital evolution you need in all product related departments a similar understanding about vision, mission and goals of customer centricity. Without such a joint mindset there is no chance to establish a working process for a customer centric transformation. Many revolutions started at the base, but to get change fast implemented in the organization the top level management has to be committed from the beginning. Ideally the creation of a joint mindset for change is happening parallel at the top and the bottom of an organization. But the vision and mission statement need already to include a strong message that is signaling change. Anyway a clear understandable and trustable vision is the key to spread the joint mindset.
Add NEW SKILLS to the teams
Based on a joint mindset it is important to add new skills to the teams via trainings, coaching or even by getting new employees with complementary skills into the teams. Such additional skill investments are very positive signals for change and might stimulate employees’ motivation to support the change process.
Create an environment of TRUST
Trust is the key for a successful implementation of a change pipeline. You need trust from the management in the workforce and also trust from the employees in the management and the organization’s vision.
EMPOWER your teams and owners
Trust is also the premise to empower product owners and teams to make decisions. The top management is more taking the role of frame keepers and frame expanders: They provide the strategic objectives, information transparency and the analytical and organizational setup for the teams and owners to make reasonable decisions and prioritize with value.
Install an open and AGILE CULTURE
Scrum and Kanban are known as an agile framework for software development based on empirical process control by transparency, inspection and adaption. But the basic principles behind Scrum can be used also outside of software development in any other department. The idea of an agile culture is so much more than scrum. It is about how things get done and about human interaction in a working environment. Agile culture means that change is a part of the company’s DNA as an ongoing and repeating renewal. It is also a commitment for an open, transparent and honest communication from management to the teams and backwards. Also failing is an important part of an agile culture. The operative team should never be afraid to fail as it is part of a learning and improvement process to succeed in the end. But it is also important to fail fast and to have a lean setup making sure to waste as less money and time as possible. Fail fast and learn even faster!
Implement ANALYTIC PROCESSES for decision making
How to make product related decisions is also something that defines a part of the company culture. Those decisions should not be made by “gut feeling” of single persons, but are also not the result of a grass-roots democratic process. Product related decisions should be mainly based on data and an established analytic process. You will need tools e.g. for tracking, testing and segmentation (or market data), but also need to make the decision process transparent showing numbers that support the results. Of course there might be sometimes strategic decision (also product related ones) that you cannot verify directly with data, but that are based on the company’s vision, mission and core goals.
Use TESTING to prove and optimize
Testing is an important quantitative tool to support the analytic decision process. E.g. simple A/B tests can bring significant improvements in conversion and revenues. But also testing needs an elaborate setup, a transparent workflow process and experienced analytical professionals. A scruffy setup can easily generate wrong data and misinterpretation. The consequence are wrong decisions.
Create PERSONAS to visualize your target groups
Personas are fictitious individuals that are representing typical users of a specific target group. A persona should illustrate core attributes and attitudes of that target group and helps to get a visual perception of users and better understanding of their needs. The tool was developed “offline” in the 80s, but shave great benefit especially for online target groups as the relationship to users and customers is mostly virtual. To give a target group representative a name, age, education, salary and specific user behavior makes it easier to gain understanding for users’ needs and changing needs in the whole organization. Although personas are a qualitative tool, the creation of those is mostly based on deep analysis of existing data from users and customers.
Use COLLABORATION to distribute knowledge and to create joint responsibility
Collaboration between teams and departments is an important part of agile culture. Somehow it is the consequence of applied empowerment and lived trust in organizations with well-balanced digital maturity. All participants in the collaboration activities need to have a similar joint mindset.
These nine tasks do not claim to comprehensively address all important aspects of digital transformation or to be completed. More they hopefully can inspire managers with similar transformation challenges and support as checklist or orientation for user centricity.