Companies are no longer competing only with businesses in their wheelhouse. They are competing with every experience that customers have during their daily lives. The abundance of digitally-native businesses are conditioning consumers to expect faster, simpler and more intuitive experiences, self-service and personalized interactions, and even anticipating and responding to needs before consumers even recognize them.
While traditional businesses have been taking continuous steps toward digital customer interaction, the need to accelerate changed almost overnight with the onset of the COVID-19 pandemic. Consumers quickly became comfortable living with digital interactions because they had no other choice. Months later, many have come to realize they like digital interactions every bit as much, and sometimes better than what they experienced before. That has only served to increase the challenge of keeping up with customer expectations.
Modern Customer Demands Create a Need for Speed
Consumers who get personal value from digital interactions — whether that is a safer experience or one that is more personalized or one that saves time — are less likely to go back to their old ways. For example, in an April 2020 survey by FIS, 45% of consumers polled said they had permanently changed how they interacted with their bank, and 31% of respondents said they will increase their use of online and mobile banking. Roughly six in 10 customers say don’t plan to return to bank branches even after COVID-19 recedes.
Companies are also realizing value: a study by Fiserv and Bank of the West found that digital banking customers generate more than two times the monthly revenue of non-digital customers, originate 13% more transactions, and are also 35% less likely to leave the bank. We are also consistently seeing improved customer satisfaction and NPS scores across multiple bank functions.
Companies that better meet customers’ expectations will build stronger engagement and more lasting loyalty. But legacy companies must find a way to move quicker. Digitally native businesses can and will continue to improve customer experience at a breathtaking pace, often bringing releases to market five and even 10 times faster than traditional businesses.
A core impediment to moving with speed is a lack of modern ways of working. Many legacy companies today have the lethal combination of organizational silos, traditional waterfall development processes and inefficient hand-offs between functions. Seventy percent of legacy companies’ digital efforts fail for such reasons.
To effectively compete in an accelerating digital world, companies must learn to act more like a start-up. Following are five key characteristics of successful digital companies that enable them to accelerate the time to value and reduce risk.
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1. Establish Clear Direction
Create a clear digital vision and strategy, fully supported by senior leaders
The term digital can be defined in a variety of ways. A distinctive, well expressed digital vision is inspirational and specific, guides strategic choices, and provides a frame for what success looks like in alignment with long-term goals. Vision focuses the organization on what you must do well and, through its exclusion, what you should emphasize less or leave out completely. Is the focus more on growth, operational excellence or superior service? Vision is often best expressed through visualized examples allowing the organization to see and get excited about what the future could look like. This approach can help employees tangibly understand what a company means by digital, inspire quick wins as well as longer-term value, and provide a north star the organization can rally around.
But a strong vision will not drive action without strong executive sponsorship and support. The degree of change required to adopt digital efforts is typically significant, so the management team must understand, embrace and actively support the potential value of digital efforts across the firm. Involve the senior team early and often, actively solicit input to gain alignment and buy-in, and engage them regularly as the programs unfold. Strong leadership support is highly correlated with companies who have seen success with digital initiatives.
Related Article: Having a Vision Is Not Enough: You Need a Shared Common Vision
2. Employ Agile Ways of Working
Start small and move fast
In the pre-digital world, companies often looked to create the perfect solution before bringing it to the market. But in the emerging digital environment, that slow-to-market solution is usually obsolete before it sees the light of day. Leading digital companies operate with a new set of principles. First, prioritize efforts rigorously and select a very short list of efforts, two or three, to focus on. Digital programs generally require a very different set of capabilities versus historical efforts, and focusing on just few efforts will ensure the proper level of attention and enable learning.
Second, employ an agile, sprint-based, test and learn approach to development. Start by developing and user-testing a limited set of features as a minimum viable product (MVP) to gain learning and course-correct as needed. Once the first set of features is gaining traction, you can move onto the next set in the backlog, or know quickly that it is not working so you can try a different tactic. This approach allows you to move much more quickly, reduce risk, and ensure the effort is truly aligned with customer needs.
Third, instill a growth mindset culture within the digital project teams. Most legacy businesses have a primarily fixed mindset, meaning employees have seen success over time by working in certain ways, and assume future success will happen using the same approach and thinking. By contrast, a growth mindset asks executives to discard past assumptions and develop a willing openness to solving problems in new ways. This willingness to consider new approaches opens up whole new avenues of creative thought and prevents teams from being inhibited by precedent-based thinking.
A great example of this was banks’ response to the 2020 CARES Act. In a matter of days, banks had to mobilize to accept digital loan applications from their small business customers under the Paycheck Protection Plan (PPP). This required a degree of agility and speed banks never knew they had. The initial offerings weren’t necessarily leading-edge experiences, but they worked and were deployed in a timeframe many magnitudes faster than banks had ever experienced. And these initial solutions provided a foundation for enhancing digital loan origination capabilities over time, and enlightened banks on how quickly they can move.
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3. Structure for Success
Create horizontal ‘start-up’ teams
Organizationally, look to structure dedicated, multidisciplinary teams who are empowered to act and think like a start-up. To be successful, these teams need to adopt an entrepreneurial mindset, and have a dedicated senior leader with the autonomy and decision authority to allow the team to move with speed. The team should be horizontal in composition, meaning that it contains all the skills and capabilities needed to make the program a success — from strategy, to customer experience, to technology, to marketing, to operations, to legal and compliance and beyond. And for the most part, team members should be fully dedicated so they aren’t sidetracked with other business responsibilities.
As a start-up, these teams must be given the room to explore, experiment, learn and fail. This means lowering the stakes and allowing the team to find the right path over time. This freedom and immersion in new ways of working is essential for building muscle memory and allowing the best solutions to emerge. At the same time, it’s critical to emphasize value creation by establishing success metrics and rigorous measurement at the start of the effort. As the team progresses, it must demonstrate how it is creating value, both for the customer and the company. Nothing creates momentum and organizational change more effectively than showing how a new effort creates new value.
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4. Establish Proper Governance
Establish a Digital Transformation Office to guide and manage efforts
Building a digital business of the future is difficult, if not impossible to achieve when leadership is already focused on running today’s business. Companies that have been most successful with digital efforts have created a standalone digital transformation office (DTO) specifically responsible for managing and governing business of the future efforts, separate from business of today work. A strong DTO has a dedicated executive level leader and steering team with cross functional representation, and functions as a delivery oversight powerhouse who guides and enables the digital teams. It balances business strategy with service excellence, drives and ensures value creation, enforces new operating norms and methodologies, and acts as a pro-active change agent within the organization.
The DTO is the tool that enables the organization to grow into how to work differently. It is directly responsible for portfolio and financial management, value realization and measurement, business and technology resourcing, vendor management, and change management and culture. Over time, once digital efforts become more established and new operating norms become integrated into the organization, the business of the future effectively emerges as the business of today, and the DTO structure may no longer be needed.
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5. Create the Right Foundational Enablers
Equip teams with the necessary technology and data capabilities
Having the right vision, process, team structure and governance in place is important, but without the right tools, you will not succeed. So much of successful digital innovation depends on the availability and application of data. This requirement for modern architecture should encompass features such as:
- Data warehouses and master data management (MDM) that govern and deliver clean, consistent and quality data.
- Middleware that makes data accessible while managing and minimizing rework.
- Flexible automation tools such as robotic process automation to facilitate testing without overburdening operations personnel.
- A modern experience layer that offers flexibility and control to try out new concepts without relying on expensive, slow-moving vendors.
Larger initiatives will take time. What’s critical here is making sure priorities are clearly stated on the company’s and IT’s agenda — if they are not already.
Turning the Principles Into Practice
We’ve all seen that we can respond quickly when we have to. The challenge is channeling that same degree of speed and energy as a matter of daily work.
Think about if and how your organization mobilized to enable digital interaction with customers during the pandemic. What was something you had to do extremely quickly? What worked well? What lessons can you take from that experience as you now approach other digital initiatives in more proactive and purposeful ways? By applying your own lessons learned, and employing the principles laid out above, you’ll be surprised how quickly you can build momentum and create new value for the organization. And in so doing, you will begin to shift how your organization approaches work yielding both greater speed and impact.