The three imperatives for digital transformation in 2021
A relentless focus on micro-experiences, micro-services and micro-behaviors can turbo-charge any digital transformation and drive business outcomes
As a new year begins, many organizations are accelerating their digital transformations and aligning it more centrally to their business goals. In response to the pandemic in 2020, organizations were forced to become more “digital” without a clear idea of what that really meant and how digital transformation could accelerate business priorities beyond the short term. For many CDOs, the new year presents an opportunity to rethink, reevaluate and renew the focus of their digital transformations. It is clear now that digital transformation is here to stay and CDOs need to reorient their efforts to drive key business priorities and accelerate growth.
Over the past five years at IBM, we have made our digital transformation central to our business in order to drive key outcomes. Our digital transformation supports the key business imperatives of driving product adoption, consumption and retention. Across a broad portfolio of highly diverse products, we have driven over 300 percent improvement in adoption and retention. At the same time, we have enabled teams to innovate on product design and go-to-market to drive a 30 percent improvement in Net Promoter Score. We have learned a lot from our successes and our failures. I have shared some of our experiences before (see Amplify, CDP Week, Information Week). In this article, I provide three key imperatives to help CDOs get started and create strong alignment between digital transformation and the overall business.
Thinking big but relentlessly executing on the small
It is common for many organizations to start their digital transformation efforts around a grand vision — such as attracting new customers, improving customer experience or executing on a new business model. While all digital transformations require thinking expansively around a grand vision (thinking big!), successful execution inevitably comes down to a relentless focus on the smallest details of user experience, platform infrastructure and organization culture.
At IBM, the success of our digital efforts is a result of prioritizing three key imperatives:
Imperative 1: Focusing on Micro-Experiences
A relentless focus on delighting users at every interaction, no matter how small.
Imperative 2: Enabling a platform architecture based on Micro-Services
A highly flexible and modular digital infrastructure based on micro services that enables reuse, “plug and play” experimentation and continuous deployment.
Imperative 3: Creating a culture based on Micro-Behaviors
An agile workforce that can continuously experiment, refine and collaboratively innovate.
While these imperatives are individually important, they collectively reinforce and amplify each other to accelerate digital transformation in any organization
Imperative 1: Focusing on Micro-Experiences
While there are many business justifications for starting digital transformation efforts, all successful digital transformations focus on delivering growth through exceptional user experiences. We are living in the “experience” era. Over 75 percent of buyers’ value experiences above anything else. In many ways, the experience is the product.
Yet, many digital transformation efforts start with goals that are not directly tied to improving the user experience. This happens because digital transformations are initiated and led by different functions and the goals often reflect the priorities of those functions. Some typical ones are:
§ IT: Build a more agile “next-gen” digital platform
§ Sales: Create a digital platform to support more “self-service” commerce
§ Marketing: Build a personalization platform for better inbound lead generation
While these are all important capabilities, it takes more than new platforms to deliver business value. Transformation efforts that are primarily focused on building platforms usually fail to deliver the business outcomes. Digital transformations need to start from a blueprint of the desired user experience and the business value these experiences drive. Without such a blueprint, any new platform becomes rudderless and loses focus and direction.
As a CDO, creating this future-experience blueprint should be the first area of focus. It is by no means an easy endeavor. There could be potentially thousands of “micro-experiences” to understand and map. At IBM, we often give teams a simple exercise to map the first five minutes of the user experience of their trial. Most teams are amazed at the number of granular experiences they need to understand. The experiences include discovering the trial, initiating registration, submitting a registration form, provisioning the product, logging into the product for the first time etc. Teams soon realize that each one of these micro interactions is potentially a moment of extreme delight or a moment of intense frustration for the user. They need to understand through data the drop-offs across each of those steps. These interactions cumulatively drive the conversion rate of users from trial to purchase. Once this linkage to business outcomes is clear, eliminating potential points of friction in the user experience and delighting the user become the top priority of every digital transformation.
Taking a user-experience centric view of digital transformation also has the power of bringing multiple functions within the company together to collaborate on creating exceptional user experiences. Successful digital transformation is rarely about doing the same things incrementally better — it inevitably involves figuring out new transformative experiences. These challenge existing processes and organizational silos. By focusing on these micro experiences, CDOs can help the organization break down siloed thinking and work together to find new sources of value for the business.
Imperative 2: Enabling a platform architecture based on Micro-Services
As organizations embark on creating new user experiences, it soon becomes apparent that there are critical “user experience patterns” that keep showing up again and again in different phases of the user journey. An example of a common recurring pattern is “user registration,” the simple act of a user providing their information or logging into a service with their credentials. While this pattern is very common on web pages, it also shows up very commonly in other parts of the user experience such as checkout processes as well as personalization experiences within products. More recently, it is also becoming common for ecosystem partners to leverage a company’s registration pattern. A core element of any successful digital transformation is identifying these repeated experience patterns, optimizing them by bringing together data, platforms and related processes and systems and sharing them within and outside the boundaries of the organization. A mature digital organization builds an extensive repository of these optimized experience patterns that lower the time-to-value of any team building high quality user experiences.
Yet, most traditional organizations have a history of building fairly monolithic IT architectures where data, platforms and related systems are tightly coupled for bespoke scenarios. This makes it impossible to bring data, systems and processes together in the exact same way to deliver the same consistent experience in different parts of the user journey. This monolithic IT approach makes it difficult to update an application without breaking it or to use a single piece of functionality within the application for new projects. It also makes it nearly impossible to simultaneously cascade experience improvements in any one part of the journey to all other parts of the journey that use the same experience.
Successful digital transformations need to have at their core a platform architecture based on small, single-function granular micro services. These discrete micro services can then be mixed and matched and reassembled to create a wide variety of complex digital experiences. As these micro services are refined and optimized, they automatically improve the experiences that use them and generate immense operational leverage for digital transformation efforts.
An equally important benefit of a micro-services architecture is that is allows the organization to shift from large development teams to smaller, more agile development teams that can bring capabilities to life much faster. At IBM, shifting to a micro-services architecture was one of the most important decisions we made at the beginning of our transformation. It provided us the pace and scale required to transform user experiences across an extensive and diverse portfolio.
Imperative 3: Creating a culture based on Micro-Behaviors
The final key imperative for CDOs is to build an agile, experimental and collaborative culture within the company. Early on, this may feel like something that can wait, so the tendency of many CDOs is to prioritize other imperatives first. In my experience, CDOs need to make cultural transformation a priority from day one. The reason is simple: digital transformation inevitably requires a different way of working that challenges most organizations. CDOs must provide teams with unambiguous permission to challenge existing structures and process in their quest to create the best possible user experience for customers.
For us, three simple rules helped teams adopt new behaviors critical to our success:
a. Strive for 1 percent improvement each day every day — A one percent improvement every day equates to a 37.8 percent improvement over a year. Instead of chasing the mythical perfect solution to problems, teams know we value and celebrate patient, consistent and relentless improvement every day.
B. Strive to get to “lift-off,” especially if the full path to success is not clear — Decision inertia is a real problem in digital transformation as cross-functional teams often get paralyzed by uncertainty and risks. By prioritizing “lift-off”—i.e., taking the smallest actions that move things incrementally forward even if the ultimate trajectory is unclear – teams can make faster decisions. Taking small but quick actions enables teams to refine trajectory through incremental steps and progress faster to the eventual solution.
C. Strive to experiment your way out of uncertainty — This complements the previous rule. As teams accomplish “lift-off”, they need to experiment their way out of uncertainties. Adopting the philosophy of “Ready, Fire, Aim” and “firing pellets before firing cannon balls” teams can take on pragmatic risks and be okay with small failures. When in doubt, ramp up experiments as a way to reduce uncertainty.
You will have already guessed that these three rules reinforce each other and create a bias for action. James Clear in his book Atomic Habits says it more effectively—
"We often avoid taking action because we think ‘I need to learn more,’ but the best way to learn is often by taking action.”
Summary
Digital transformation requires bringing platforms and people together in order to enhance the user experience and engage users in new ways. This can be hard as it requires working simultaneously on multiple dimensions of change internally and externally. By focusing on the three imperatives of micro-experiences, micro-services and micro-behaviors, CDOs can set the right priorities and direction for the transformation. Ultimately, focusing on these imperatives aligns digital transformation more directly to business outcomes and creates new ways of working. This empowers teams to surmount obstacles, bring big new ideas to life and provides the resilience that separates successful digital transformations from others.
Disclaimer: The views and opinions expressed are those of the author(s) and do not necessarily reflect the official policy or position of my present or past employers.
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I am collaborating with a friend/associate to help grow a digital product. We're currently transforming how we generally think about marketing and growth (product-led). This article is a great way to understand "what's next" in terms of how to take some specific actions based on the new way of thinking. Thanks!