Insights

Digital Transformation

Strategy of Operational Improvement

Jan 25, 2019

Digital natives on the markets: reassess the strategies to stay in business.

Digital transformation requires in-depth changes on many levels. Companies redesign their business models, reinvent their daily operations, assemble a high-quotient digital workforce, and implement new technologies. Each level of disruption poses different challenges and offers new opportunities for companies to improve customer experience, streamline internal performance and ultimately reduce expenses and increase revenue. Instead of falling into obscurity along with industry incumbents, companies that embrace digital transformation succeed in the ever-changing business landscape.

While other digital transformation steps require significant time and resources, the reinvention of daily operations is a step that can be implemented incrementally with an overall strategy in mind. Successful transformation of operations should be customer-centric and journey-based.

Digital transformation through the focus of the customer journey
 

Journey-Based Strategy of Operational Improvement

Instead of starting a full overhaul, many companies choose the seemingly safer option of updating existing operations. Yet, this approach does not yield the expected results and does not pave the path to the full-scale digital transformation. Revenue-increasing disruption should be customer-centric and start with putting the clients’ needs first.

Customer Journey Begins at Pain Points

To overcome competitors and reap the benefits, business transformation needs to be  customer-centric. Companies start by interviewing their customers and analyzing existing data to identify the clients’ pain points. There can be dozens, but the 80/20 principle helps identify 20% of pain points that affect 80% of the customers.

– For amusement park goers, long lines that waste quality family time are a major pain point.
– Patients in need of first aid struggle with quickly locating free parking spaces near the hospital.
– Banking clients identify reliability, ease of account setup, and loan formalization as their priorities.
 

End-to-End Journeys Define Transformation of Operations

After identifying the customers’ pain points, businesses outline the journeys that trigger them. With an ideal “to be” scenario of user experience in mind, companies inverse the customer journey from end to start. This approach stimulates a customer-centric thinking and prevents businesses from falling into old patterns.

Upon detailing critical customer journeys, top managers identify the journeys vital for business growth. Companies prioritize customer retention and acquisition rates, though other KPIs are also acceptable, including the number of customer interactions, average purchase or the number of mobile app users.

For Retail, major customer journeys include:
– Learning about the store or the brand
– Locating the necessary merchandize
– Payment process
– Returns and other issues

The best customer journeys include the minimum number of steps, saving clients’ time and company’s resources. The process of mapping out critical journeys requires holistic effort on the part of IT, Marketing, Sales, and Support departments.

Internal End-to-End Journeys Affect Transformation Efficiency

Without internal changes, a customer journey alone cannot transform business operations. Therefore, business process mapping needs to be twofold. For each of the critical customer journeys, companies identify the corresponding internal journey and alter it to shift from “as is” to the ideal “to be” scenario that ensures maximum customer satisfaction and operational efficiency throughout all departments and management levels.

The mistake many companies make in the course of the digital transformation is not considering their employees’ needs. Unilateral decisions and changes to the daily operations, especially those involving the employee toolkit, result in decreased efficiency. Without a clear understanding of what digital transformation requires, employees revert to old habits and turn to tried-and-true patterns, tools, and software.

To prevent this outcome, successful companies treat their employees as customers, mapping their journeys in the same way to harness talent and ensure high satisfaction rates. Cross-department communication is the critical success factor for the digital transformation of internal processes.

Three levers of digital transformation
 

Adoption of Multiple Levers Achieves a Compound Impact

Thousands of companies are embracing operations’ digital transformation by adopting strategic levers that ensure quick results. These levers are not universally applicable, and their efficiency depends on the market and business model. However, the timely and combined use of multiple digital transformation levers has the potential to generate the shift necessary to overcome competition and remain profitable despite the growing number of digital native rivals.

Customer-Oriented and Internal Journeys’ Digitization

Digitization improves customer-oriented and internal journeys through the implementation of digital tools and software. On the client’s level, digitization reduces the number of steps on the journey, saves time and ultimately ensures higher satisfaction rates. Digital natives like Airbnb and Uber utilize digitization to connect customers with service providers and reap the benefits. On the internal level, digitization and automation reduce the number of routine operations, saving time and resources for critical and creative tasks requiring human input. Data aggregation, automatic reports generation, and multiple mundane tasks can be enhanced through software solutions.

Holistic digitization of customer-oriented and internal journeys can dramatically change the daily operations, reducing costs and increasing profits. A single shift towards self-service online or mobile application can free up significant resources better spent on the implementation of other digital transformation levers.

Data Based Decisions through Advanced Analytics

Autonomous analytical tools are used to process previously obtained data to derive predictions and recommendations. Through the use of sophisticated software, companies can accelerate decision making, and this is a valuable prerequisite for the growth of profits. Machine learning and neural networks have become accessible and these technologies supply recommendations with minimal human input. Banks’ loan managers and insurance companies are adopting advanced analytics tools to assess the client’s credit history and payment ability, thereby preventing fraud and losses.

Outsourcing and Lean Process Redesign

Lean business reengineering cuts wasteful and redundant operations and processes throughout the production and management cycles to reduce the operational costs. Coupled with Kaizen or Agile project management methodologies, lean process redesign is well suited for both the short-term and long-term processes, as well as for the design and implementation of greater customer centricity.

Outsourcing is one of the lean process solutions for routine and non-customer-facing jobs. Using resources outside of the main business is cost efficient and frees up internal workers to pursue critical challenges. Report generation, correspondence management, and documentation processing are common examples of tasks worthy of outsourcing.

The Iterative Process of the Digital Transformation

The operational-improvement strategy for the business’ digital transformation is not irrevocable. Notwithstanding analysis and careful planning, it is impossible to predict all consequences of the changes companies introduce to customer journeys and internal operations. Ignoring the possible risks and failing to account for them is the major mistake many managers make.

Instead of blindly following the long-term transformation plan, successful businesses employ the iterative agile approach. Each change is prototyped and tested, analyzed and assessed before being implemented company-wide. This approach ensures quick implementation of the planned operational strategy while staying flexible to address the arising challenges and risks.
Digital transformation is not a destination, but a journey away from oblivion into successful and profitable future.

The Time for Digital Transformation Is Now

The time for digital transformation is running out. Digital natives are rapidly taking over markets and industries, and incumbents need to reassess their strategies to stay in business. With revolutionary technologies becoming available for small to medium business, the investment can be minimal. The customer journey-based operations transformation through efficient digitization levers has the potential to make the difference between bankruptcy and survival. Most companies taking this digital transformation road report increase in revenue within one year.

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