Digital Without Purpose Will Fail

It’s challenging to find a company today that isn’t at least attempting to advance as a digital business – but that doesn’t mean every digital initiative is a success. According to Michael Gale of PulsePoint group, 84% of digital initiatives ultimately fail. The reasons for these failures to launch abound, but they can include a risk-fearing culture, the paralysis caused by shifting regulations, and the limitations inherent to legacy systems, among others.

Nothing, however, kills a digital transformation effort more assuredly than the failure to define a purpose. Companies that don’t know what they’re aiming for with their digital strategy are the ones guaranteed to fail – no matter how many digital technologies they implement or how many data scientists they hire. Simply put, without a purpose for existing, digital initiatives cannot succeed.

According to a recent study conducted by Cognizant on how digital will change the future of work, the total revenue impact of digital is expected to more than double between 2015 and 2018, reaching 11.4% of total revenue and unlocking value of about $770B per year. And according to research from Harvard Business School professor Marco Iansiti and Keystone Strategy, leading digital companies generate better gross margins, better earnings, and better net income than slower digital adopters. The mandate, then, is clear: Find a purpose first, and digitize second.

Moving With Purpose

When it comes to defining a purpose in today’s digital age, it’s hard to get too grandiose. Facebook’s mission statement, for example, is to “give people the power to build community and bring the world closer together.” Meanwhile, Tesla aims to “accelerate the world’s transition to sustainable energy by designing and manufacturing the best electric vehicles and energy storage systems.”
Compare those aspirations with what drives many digital initiatives today. Current initiatives are often conducted as side experiments or prototypes; are focused on incremental enhancements to a user experience; and aren’t scalable or don’t address significant problems related to broken processes. A business may be aiming to increase self-service mechanisms or to boost digital marketing outreach, and these are worthy goals – but do they really move the goal posts for the business, or for society at large?

Domino’s Pizza serves as a good example of using digital efforts to achieve broader company goals. The organization’s latest venture into pizza delivery via drone could become an integral part of the company’s larger goal of being “the best pizza delivery company in the world.” Recent innovation efforts by Domino’s have focused on making the customer experience of ordering a pizza nearly effortless, whether that means simply opening an app or tweeting a pizza emoji. So far, so good; Domino’s reported strong growth in 2016, both in the US and globally.

Then there’s Deutsche Telekom. Faced with changing customer behaviors and an altered competitive landscape, the German telecom giant is rethinking what it means to be a communications provider. After conducting an in-depth study of digital natives aged 10 to 16 across 5 countries, the organization created a roadmap to digital that incorporates expected future trends and customer demands, such as free connectivity and the obsolescence of phones. In an attempt to fulfill its strategic vision of being “a trusted companion in an increasingly complex digital world” and of “making life easier for people and enriching it for the long term,” Deutsche Telekom is reinventing the customer experience at its retail stores. This overhaul includes applying AI-driven chatbots to provide better customer service and investing 80M in innovation efforts. In 2016, the company reported achieving substantial increases in net revenue and exceeding its earnings targets.

Another example of a company developing digital with purpose is General Electric. This century-old industrial company is an unusual case: It now views itself as a software startup. Rather than pursuing digital incrementally, the company has instrumented its portfolio of products and machines as part of a broader “Industrial Internet of Things” strategy. Leveraging the two-way flow of data provided by this connectivity, the company is working to redefine customer relationships by providing zero unscheduled downtime and real-time intelligence in order to increase equipment and ecosystem efficiency. As detailed further in Frank, Roehrig, and Pring’s What to Do When Machines Do Everything, in General Electric’s view, the Industrial Internet of Things is set to generate a market worth trillions of dollars by 2030.

Defining Digital that Matters

Even if a company has a defined purpose for its digital efforts, that purpose may be too narrow in scope or too shortsighted to help the organization reach its ultimate goal. Over the past decade, the most commercially successful digital endeavors have been those focused on providing a fun experience. Consider, for example, digital startups like Twitter and Snapchat. While many of these tech unicorns have radically changed how we communicate and socialize, whether or not they deliver life-changing capabilities is debatable. In the grand scheme of social problems to be solved – including the need to provide greater access to healthcare, to eliminate hunger, or even just to improve basic government services, to name a few – maintaining a focus on posts, likes, feeds, and photos can seem frivolous.

Going forward, businesses may begin shifting focus from “digital that’s fun” to “digital that matters.” New technologies will begin to transform how people are educated, fed, transported, insured, medicated, and governed. Over the next decade, digital “successes” will be considered failures if the businesses driving them squander the opportunity they have to use digital to really impact the world. The opportunities for important innovation are endless. How could governments reduce the stress and tedium of filling out tax forms? How could healthcare providers streamline the dreaded visit to the ER? How could airlines speed up the seemingly infinite wait to pass through airport security? And how could governments help respond more quickly and adequately to global crises?

While the purpose of a digital strategy needs to be broad, the execution can start small. In fact, once the purpose is established, the business will be free to focus on a targeted area in acute need of change, allowing one disruption to lead to another. Financial services providers could extend access to banking services, and healthcare providers could serve patients in remote areas through telemedicine. Think digital payments and wealth management robo-advisors, item-by-item insurance, and chatbot-automated claims processing. By starting small and then moving outward, a company could create disruption across its entire industry.

Key Tenets of Success

However, even the most honorable purpose in the world is only as good as the business’s ability to execute on it. Doing so often requires fundamental changes in traditional processes, approaches, and mindsets. The key tenets of successfully implementing a digital program include:

  • Design, pilot, launch, iterate. There must be plenty of room for learning and correcting. Leaders need to make teams comfortable with presenting “quick and dirty” prototypes and reversing their direction on design solutions that they previously committed to. In order to secure funding approval, businesses need to compress their prototype development time to four weeks or less to allow enough time for user validation and solution socialization.
  • Develop a minimum viable product (MVP). In a market economy that’s both fast moving and uncertain, businesses need to be flexible: they should have an end goal in sight and a broadly outlined plan for getting there. This means getting comfortable with the idea of going to market with a minimum viable product (MVP). Strong leadership and deep expertise are required to identify the most critical value proposition to test in the real world, as well as to know how to pivot to a different approach if the first release fails.
  • Foster open ecosystems. One of the most disruptive things about digital is that it has made business ecosystems more complex and interconnected. Digital businesses need to collaborate with multiple external partners by welcoming them into previously closed systems and infrastructures through open application programming interfaces (API). Regulatory changes, such as the revised Payment Services Directive (PSD2) in Europe, are helping to turn the tide of data sharing, further accelerating the need to design for open ecosystems.
  • Redefine failure. Digital techniques have reduced the cost of testing ideas in the market, allowing companies to roll out new initiatives only when consumer response is positive. With this in mind, leaders need to encourage their teams to push the envelope so that mistakes are made. Doing so will accelerate the learning curve and amplify creative firepower.
  • Make all parts of the business customer-centric: Due to the increased customer outreach facilitated by digital technologies, every part of the organization needs to see itself as directly impacting the customer. This mentality extends to teams that might have previously considered themselves internally focused, such as operations. Rather than limiting performance measurement to metrics like operational efficiency, for example, even these groups need to reframe their boundaries and align their goals with revenue increases.

Thinking Big, Working Small – and Quickly

The journey to digital requires thinking big and executing in fast, surgical strikes. It requires innovating with purpose while delivering results for the business. All of this is possible for businesses that set their sights on a digital future purpose and enable themselves to make changes in course along the way.

the author

Lester Lam

Lester Lam is vice president, digital transformation at Cognizant Digital Business.

the author

Shashidhar Bhat

Shashidhar Bhat is senior director, digital transformation at Cognizant Digital Business.