Digital transformation has been a hot topic amongst marketers for some years now, and the shift online which was driven by the Covid-19 pandemic has made it even more important recently.
In this article, I'll look at what digital transformation is, why it's necessary, and the part played by technology in these processes.
What is digital transformation?
Digital transformation refers to the change required from businesses to adapt to changing customer behaviour and expectations. This change in behaviour has been brought about by technology - the internet, the smartphone, social media, and so on.
While many businesses that emerged in this new digital world may not need transformation, often more established organisations need to adapt to be able to survive and thrive, while any business needs to be aware of trends and be prepared to adapt accordingly.
The common theme behind digital transformation is the need to adapt existing technology, structures, and ways of working to meet changing customer needs.
There are plenty of examples of famous brands that have failed to keep pace with the competition. having been the market leader for many years, Kodak failed to adapt to the rise of the digital camera, and carried on producing traditional film cameras right through to 2004.
The board ignored the warnings of the marketing team, and failed to listen to customers. By the time Kodak began to make digital cameras, it had lost its market share to multiple competitors, and was forced to file for bankruptcy in 2012.
The need for businesses to adapt to changing circumstances is not a new concept in itself, but the vast changes brought about by the internet and the technology used to access it have provided new challenges for organisations.
What's driving the need for digital transformation?
Transformation often begins with the recognition within the business that fundamental change is needed. This realisation may come as the result of a downturn in performance, the entry into the market of a new competitor, or events that expose the weaknesses of existing strategy.
One or all of the following factors often bring about the need for digital transformation. Technology can drive changes in customer behaviour, or it can be created as a result of it. Often, it can be the fact that competitors have adapted to new tech and behaviours more rapidly.
- Technology. We've come through a period of rapid change brought about by technology. The invention and adoption of the internet has affected almost every single business model that existed before, by changing the way in which people expect to buy and interact with businesses.
- Changes in customer behaviour. Technology can drive changes in behaviour, but this can also be the result of changes in society, or events like pandemics. Failure to keep up with customers can leave you lagging behind.
- Competition. In competitive markets, you have to keep moving to stay ahead of competitors. Existing competitors can outperform you, while new entrants can disrupt the market and steal your market share.
Events like the pandemic can also force change, or at least speed it up. People who had been pushing for transformation within companies now had the political capital, and were more likely to be listened to by stakeholders.
The closure of physical retail and other business locations fell hardest upon those firms which has yet to develop their online channels effectively.
An obvious example is Primark, which has famously opted out of selling online. The retailer may have had valid reasons for this under normal circumstances, but was hit hard by the loss of sales during 2020 and 2021.
It affects all companies, not just retailers. Customer interactions now had to take place online more than ever before. McKinsey stats show that the majority of all customer interactions happened through digital channels in July 2020, up from 36% just months before..
It's the sheer speed of change that means companies need to adapt and change more than ever before. The changes in tech and customer expectations are more rapid than for many years.
This example from HBR illustrates the pace of change:
“In 1958, corporations listed in the S&P 500 had an average stay of 61 years. By 1980, numbers from research firm Innosight revealed that the average stay had declined sharply to 25 years. In 2011, the average tenure dropped to 18 years. At the present rate of churn, research estimates three-quarters of today’s S&P 500 will be replaced by 2027.”
Where does Martech fit?
At the heart of an effective digital transformation strategy is the customer. Businesses succeed or fail based on whether they are relevant to consumers. Kodak failed because it was pushing film cameras when people wanted digital, Blockbuster lost out to Netflix as users wanted the convenience of renting and viewing videos online.
Put simply, if you are thinking about what your customers want, whether your products or services are relevant, and the all round customer experience, this will help your business succeed.
Customer experience is all important here, and this is one area where Martech can help. Customers want a convenient experience, they want brands to understand their needs, and to use their data to create personalised and relevant experiences.
This is driving the uptake of Martech as businesses need the technology to manage customer data and to provide the experiences that customers are looking for. It's likely we'll see further adoption of marketing technology as transformation strategies continue.
For example, companies focusing on customer loyalty, keeping existing customers happy, are investing in Customer Data Platforms to help them unify, manage and learn from customer data.
This is the tech that can ensure that marketing is timely and relevant, and allows companies to provide that more personalised experience.
It's not just about technology though - it's important that organisations have the skills and teams in place to manage and use technology more effectively. This was the main barrier identified in our recent Customer Experience Trends & Insights report,
Lack of skills and knowledge with regards to tech and data was cited by 53% of respondents, while lacking the necessary tech solutions (43%) was the second biggest obstacle. to creating a great customer experience.
To make the most of the technology available, an effective transformation strategy needs to include a review of business and marketing strategy in this area, and an understanding of the tech needed to achieve these goals.
Key ingredients for your digital transformation strategy
There is no one size fits all solution for transformation, but the need for digital transformation needs to be recognised by senior management and decision makers, and to be spread throughout the organisation.
Here are some key areas to consider when setting strategy:
Set strategy in practical terms
A strong strategic vision is essential. Think about how you can use tech to improve overall business performance and efficiency, to expand your market, or to improve overall efficiency within the business.
For example, does your current tech allow you to reach customers effectively across the channels they want to use? Are you able to use customer data to improve and personalise their experience?
It’s not just about adopting technology and new ways of working for the sake of it, but to achieve clear business goals through the use of tech.
Make sure employees are involved
Transformational change requires buy-in from all levels of the business, so it’s important to set this out clearly. It can be a disorientating experience if they don't understand what is happening.
To most employees, digital transformation probably just sounds like more management-speak, so it’s important to explain in practical terms how transformation will benefit them, how it will affect their roles, and why it’s important.
Digital transformation teams need to have the authority
People with responsibility for setting strategy and implementing changes need to have the backing of senior management and the authority to put changes into practice.
This means that the C-suite needs to be brought in to digital transformation projects, attending meetings and helping to build support throughout the whole organisation.
Align transformation to business goals
There need to be a clear and practical vision of the business goals, and an understanding of the benefits transformation can bring,
Transformation projects can affect every team within the business, their roles and their budgets, so they need to be aware of the reasons this is happening. .
A clear vision of the intended outcomes – increasing online sales for example – can help employees see that any effort is worthwhile.
Understand your Martech requirements
It’s important to know exactly where your business is in terms of technology and skills. There's no point buying the tech if your company lacks the required skills and knowledge to use it effectively.
It makes sense to pause and examine your current marketing tech stack and whether it fits your marketing and business strategy. The approach to Martech will be fundamental to the success of any transformation, so it's important to find the tech that help you meet your goals.
The digital experience also matters for employees, as it can negatively affect work culture, and impact the quality of service to customers.
For this reason it’s important that technology supports how you want to work. For example, does it make the sharing of data and general cooperation between teams easy and efficient?
Transformation should be a long-term strategy
Technology doesn't stop changing and customer behaviour continues to evolve so transformation never really ends.
Instead, it's about measuring progress, learning what works and what doesn't, and be in a place where you can respond to the trends that drive the need for transformation.