7 steps to building your digital transformation strategy
Digital transformation has moved from fueling vague futuristic predictions and philosophical discussions and into the boardrooms as one of the major growth drivers. This shift from the afterthought and into the top-level priority has been gradual, spanning many decades. However, the recent market shifts spurred by the COVID19 pandemic have significantly accelerated the ongoing digital transformation trends.
2020 has been an accelerator for digital transformation trends for many reasons:
- New competitive threats posed by recent digital newcomers as well as tech giants
- The macroeconomic pressures and interest rate drops
- The downward pressure on premiums and economic downturn in the wake of the 2020 COVID-19 pandemic
- The lockdowns and movement restrictions rendering old operating models not viable
- The aging legacy technology
- The ever-stricter regulatory requirements
2020 has seen significant leaps on the digital transformation front, especially in the financial services and insurance industries, bringing with it disruptive change and forcing even the most conservative organizations to embrace entirely new business models.
The ongoing pandemic has been a catalyst of digital transformation, prioritizing customer experience and opening new opportunities to develop greater customer engagement, gather insights, and optimize to meet customer needs more effectively. Digital innovation helps businesses engage with customers and open up commercial opportunities, despite the pandemic's challenges.
The 7 Step Guide to Digital Transformation
We’ve compiled a short guide to help you get started on your digital transformation journey.
1. Define the scope
Evaluating the current state of affairs, defining the desired state, and mapping a digital transformation roadmap that helps the organization get there is the first order of business when embarking on a digital transformation customer journey.
Defining the scope is the first step in mapping out a high-level strategy to make that digital transformation vision a reality.
At this stage, the scope doesn’t have to be fully worked out and documented—that’s what the final digital transformation strategy itself is for—but you should have already determined the significant components of your digital transformation strategy, your goals, and the reasoning behind them.
- Determine the digital transformation vision
- Settle on a high-level strategy for guiding that vision to reality
- Identify the scope of your current strategy
- Start creating a roadmap to capture and communicate that vision and strategy to the rest of your organization
2. Define what success looks like (the KPIs)
The next step is defining the goals and what success will look like, which can be achieved by selecting KPIs to monitor to evaluate your progress. A KPI is a measurable value that demonstrates how effectively a company is achieving key business objectives. Depending on your goals, there are many metrics you can choose from when it comes to digital transformation initiatives.
Measure both internal and external KPIs
Customers measure external success, so your Net Promoter Score and additional feedback loops provide a good set of KPIs. Internal success is mainly tracked by metrics measuring the productivity of the digital workforce: workflow efficiency, shortened claims cycles, and shorter onboarding times are helpful KPIs.
Here are some metrics to keep in mind:
- LTV (Customer Lifetime Value)
- Customer acquisition costs
- Hours Saved in different departments (IT, Sales, Service, Operations)
- Revenue from new digital services
- Operational improvements
- The customer experience (often measured via Net Promoter Score)
- Workforce productivity
- Operating expenses
It is important to keep in mind that in 2021, digital transformation isn’t just about going from pen and paper to digital tools. Sophisticated tools like artificial intelligence and machine learning to automate processes are the new normal. The more complex digital initiatives become, the more critical the ongoing measurement of performance becomes.
And as you continue on your path to digital transformation, you’ll want to hone in on core value metrics that are relevant for your particular organization. Go beyond core business metrics that track the bottom-line impact, and delve deeper into metrics tracking activity and efficiency metrics to get the full pictures.
3. Ensure buy-in from all relevant stakeholders
Digital transformation touches upon everyone in your organization. So once you determine your digital transformation vision, which is the big-picture plan for what you are trying to accomplish in the market and for your company, it is essential to communicate it to all relevant stakeholders.
Change is often painful, and not everyone will be happy about shifting the old way of doing things. It is vital to communicate your vision's benefits and value, building a clear picture of how the result will look.
Organizational silos, miscommunication, and misaligned priorities are the reasons why most digital transformation initiatives fail; according to Forbes, the failure rate is a staggering 70%. Digital transformation is a team sport, and everyone must be on board with what you are trying to achieve.
4. Support the digital culture
On the surface, digital transformation is all about technology. Yet, it couldn’t be further from the truth. Digital transformation fundamentally changes the ways businesses operate and deliver value to customers. And it encompasses a cultural change that requires organizations to continually challenge the status quo, experiment, and get comfortable with failure.
Digital culture often goes against the established patterns of behavior, especially in more conservative industries such as financial services, banks, or insurance organizations. Encourage the shift to a new digital mindset whenever possible by rewarding experimentation, learning from failure, and challenging the status quo.
5. Define high-impact projects
Getting the buy-in is much easier once you’ve demonstrated initial success. That is why it is best to tackle high-impact projects first, to show the ROI and give momentum to your digital transformation strategy.
Understand and calculate the potential return on investment (ROI) of all individual projects on your digital transformation roadmap. Then rank them, starting with the highest ROI first - those at the top of the list are your first-order priorities.
6. Get the right tools for the job
Digital transformation cannot be successful if you are not using the right tools to achieve your goals. Enterprises have to deal with high evolved tech stacks that often encompass outdated legacy technology as well as cutting-edge innovative tools. Making these technologies play nicely together is not a challenge for the faint-hearted.
There are multiple ways digital transformation solutions and projects can be pushed forward.
- You are deploying internal resources. Your IT team is driving the project forward. The downside here is that your resources are limited, and tasks quickly pile up, leading to backlogs and delays.
- Outsourced consulting firms. This option allows you to go beyond the limitations of your internal resources (budget permitting.) But outsourced projects require hands-on management, careful budget planning, are costly, and often fail to deliver the promised results.
- No-code tools and technologies. This is a great way to amplify your internal resources by giving your developers and non-developers the ability to spin up digital products and applications quickly. The downside of a no-code platform is that their application is limited to repeatable and relatively simple projects. No-code tools are not well suited for complex, ad-hoc projects - those are better handled by one of the other two options (internal IT vs. outsource).
7. Monitor performance and optimize
One of the main recipes for success is ongoing measurement and iterative improvement on an ongoing basis, as a matter of strategy.
Optimization must not be an afterthought but an integral part of every digital transformation initiative within your organization.
Digital transformation is anything but easy, but having a well-thought-out and executed strategy will significantly improve your chances for success.