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70% is the probability that a digital transformation (DX) or innovation project will fail . Of the 1.3 trillion dollars invested by companies around the world that risk their fortunes, $ 900 billion is lost without ever recovering the investment, nor achieving the promised prosperity.
But not only money is lost. In the worst case, it could weaken the courage of an organization's leadership and the motivation of employees who placed their faith in the hands of their superiors, making those companies more conservative and immobile than they had been before such initiative. Under that circumstance, the only thing that can be expected is for the organization to stay afloat.
There is no single formula that guarantees the success of digital transformation or innovation. However, there are key points that mitigate the chances of failure. The main causes of the failures include: lack of vision and lack of designated unit.
4 connections of a vision
The performance indicator for results is ROI, not RAOI, or random acts of innovation. What has been observed in many companies is the occurrence of multiple innovation projects of various scales initiated and carried out in parallel by different divisions and departments of an isolated organization.
In digital transformation, whose main premise is to prioritize and perform overall optimization, as well as synergy within an organization, RAOI is unlikely to lead to advancement for the entire company. Again, this is why a robust and universal vision under which the entire company can attempt new collaborative efforts, as well as full commitment and leadership from the management level are critical. This is where the four links come in to connect the fundamentals of a DX / innovation vision.
1. Connect the DNA of the company and customer needs
One of the main reasons many innovation projects fail is because the vision of a company is not suitable for customers and here are three typical cases of errors in a DX / innovation vision:
- Focus on technology: Vision is intended for amazing technology (i.e. AI and VR), and customer needs are left out of the picture.
- Focus on profit: The vision boasts that it is “made for the customer,” but what the company really had in mind was only how to increase its revenue.
- Isolated in the brand: the vision is based on the customer's needs and the appropriate technology to be acquired is correctly evaluated, but the integration of the company's assets has not been taken into account and the plan does not lead to creating advantages or develop the skills of the company.
The way to avoid these mistakes is quite simple: think about what are the main needs of customers (why are they spending their money to use your product / service?) And define the core of the company's DNA; Having done this, both points must be joined with a minimum set of technology.
Starting from this base, uniting customer needs, the company's DNA and the required technology, we can begin to draft a vision to which everyone can aspire.
2 Connect the businesses of today and tomorrow.
The role of a CEO encompasses a dual nature: One side is realistic, severely monitoring daily operations to maximize short-term profits, while the other is a romantic who tries to foresee 10 years ahead and looks for new opportunities to help achieve the sustainable growth of the company.
To ensure the full commitment of a CEO and the board of directors, a vision should include both a plan to improve the company's current business and the stage to create new business opportunities for the organization's future.
At this point, there are three strong arguments in favor of sharing:
- Sharing data. It's about improving current engagement with customers while using newly acquired data from new experiences to create new businesses.
- Sharing technology. It consists of taking advantage of the internal technology originally developed to improve internal operations, modifying / repackaging it to provide it to external entities “as a service”.
- Share human resources. Staff who constantly adopt new technologies and methods in their workflow have the potential to become the energy source for new business start-ups, leading to raw and labor-intensive processes.
The objective of this point is to incorporate the image of a prosperous future of the company and project it through the rising generation that will shape the tomorrow of the company. Linking the improvement plan in the context of the current business with the vision of the future will mark the way forward.
3. Link independent innovations with growth strategies
There is another business acronym that has become very common these days: POC, or Proof of Concept, which consists of conducting a pilot study of a certain method or idea to demonstrate its feasibility or to obtain evidence that said method / idea It has practical potential.
Although there is nothing wrong with the approach itself, the reality is that POC studies are often presented in the form of “one-idea proof” or a cosmetic touch-up of something that already exists. The purpose and positioning within the roadmap of an initiative should be much more significant.
The implementation of a POC should be the first step that an organization must take and its positive result should be considered as a “vision test” or supporting evidence of the overall effectiveness of the initiative and the potential to contribute to the growth of the company. medium and long term perspective.
4. Connect the data acquisition strategy to achieve customer engagement
The data is the new oil. Much attention is paid to what type of cutting-edge technology would be purchased in innovation / DX initiatives, but technology as such is becoming a commodity.
Most of the technology to accomplish planned goals is already available. But it is the data that allows the technology to work and be beneficial for the company, therefore, owning a high quality proprietary database determines the value of the result.
The method called “user in the loop” allows companies to acquire high-purity data while keeping acquisition costs at a manageable level by designing a data acquisition mechanism that involves exchanges with customers through experiences.
By providing incentives that attract customer interaction at the company's touch points, the company can induce proactive customer behavior through which data can be captured.
As mentioned in the description in point 2, making the most of customer engagement opportunities to acquire the desired data is what companies should aspire to design. This is how you get the right fuel to kick-start your vision.
One of the cornerstones of innovation / DX initiatives is designing a new business approach that meets the true needs of the customer by effectively leveraging the company's assets and culture. This refers to strengthening engagement with customers and improving short-term profits, while creating future business opportunities using the new data and technology acquired.
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* The author is planning director of Dentsu Americas .