Digital Transformation: easy to say, hard to do

WHERE WE’VE BEEN

Ten years ago, I wrote the post coining the term “social business” to describe a growth opportunity for brands beyond social media strategies at that time. Dion Hinchcliffe and I eventually wrote a book to unpack the concepts, illustrated in this graphic:

social business design

Today, “social business” has reverted back to its original meaning within the non-profit/philanthropic community, while social media for business has folded into the broader scope of digital media and marketing. But brands still need help and the current hot term for the changes needed is “digital transformation.”

The key drivers of yesterday’s “social business” underpin today’s digital transformation, having evolved over the past decade:

Technology

  • Mobile devices are more powerful than ever, but Moore’s law has plateaued and Apple and other manufacturers are seeing upgrade cycles slow down. A decade ago you might have been hanging on to your Blackberry for the full physical keyboard; today you’re hanging on to your iPhone 7 or 8 because new features aren’t enticing.
  • Broadband connectivity at home is widely available, leading to mass adoption of smart home technology. Searching online for knowledge used to mean opening a web browser on your desktop computer and typing words into a search engine. Now Alexa and Siri are a conversation away from completing your quest for knowledge.
  • The cost of physical data storage has gotten as close to zero as profitably possible. Conference tchotchke USB drives used to be so awesome, with 4 or even 8 MB of storage. Now you can get 5 GB of free cloud storage along with your mobile device that could land an Apollo spacecraft on the moon.

Society

  • Online sharing has become commonplace and some people have made a living out of the practice. Ask kids today what they want to be when they grow up and many will answer, “a YouTuber.” Social media isn’t just for sharing consumer service frustrations and conference updates; it’s how the world gets its breaking political, economic, and entertainment news.
  • Millennials have not only entered the workplace; in many cases they’re running the show. The oldest millennials are almost 40 years old and carry expectations for their work and world around them, which may not align with institutions that are grounded in the values and beliefs of a different generation. The result has been cultural change; witness #MeToo and Brexit.
  • “It’s not information overload…it’s filter failure.” This groundbreaking insight from Clay Shirky in 2008 describes how the internet’s minimal cost for publishing and distribution resulted in too much irrelevant information online. Now we have filter failure of an entirely different sort – our newsfeeds are finely tuned to provide very narrow streams of content that are personalised, monetised, and politicised.

Work

  • When we thought through social business design in 2008, the world was bottoming out in the Great Recession. Since then, we’ve seen a historic bull market run and collateralised debt obligations have returned. Fewer businesses are operating with a burning platform but those that are – e.g. UK retailers with widespread physical presences – discover that underinvestment in social business design was a mistake, as new market entrants are more closely connected to consumers and winning in the new world.
  • The open office plan has been exposed for its true purpose: cost-savings. New studies show that productivity and employee dissatisfaction drop in open floor plan offices. Startups didn’t have or want to spend money on the non-essentials, so they went with open space. Enterprises spin the open plan as collaborative and agile, but walk around an open office in New York or London and you’ll see the majority of workers wearing headphones – it’s because open offices kill productivity. Save money on hard costs, lose more on soft costs.
  • Long live email! Email used to be maligned as the place knowledge goes to die, but lives on due to regulatory requirements, budget constraints, and unwillingness to change. Messaging apps like WhatsApp, Kakao, and Discord play an important supporting role, even if not officially supported by the IT department.

WHERE ARE WE NOW?

So the world has gotten more wired, consumer and employee expectations have risen, and businesses face increasing pressure from new market entrants that face lower barriers to entry. Many brands now look to digital transformation as the solution, with dreams of quantum computing, self-driving cars, and augmented realities.

But let’s be honest. All executives know their companies could get better at digital, but individual compensation schemes and corporate shareholder expectations aren’t structured to allow for proper time and investment into the hard work and deep cost of a true transformation. It’s easy to say “transformation” but the hard work and political commitment to make investments can take years to become reality.

Thus, we end up with fragmented efforts across departments, whether marketing, product, or operations: a campaign with a great sharable hook, but no CRM; a product with so much potential for connectivity, but no integration; or a system “upgrade” that takes years to implement that nobody wants to use because their consumer experiences are years ahead.

WHERE DO WE GO FROM HERE?

Getting digital transformation correct requires a commitment to change. It requires a holistic approach to people, process, and technology. WHY and HOW it happens depend largely on strategy that’s specific to situation:

  • How do we create and sustain competitive advantage?
  • What unique capabilities do we have?
  • How can we manage financial commitments?
  • What do we do and not do?
  • What is our timing?

In the next ten years, no one will be surprised to see hundreds of well-known brands go into administration. Outdated business models obscure the critical changes needed to deliver the contemporary experiences that consumers, customers, and employees expect. The winners will understand how to invest early and judiciously, turn assets into advantage, and harness evolution in work, society, and technology.

Quick take on what’s hot in digital right now

There’s a lot of noise in the marketing world, with industry players from all angles talking about what’s now and what’s next. What that in mind, I have some thoughts on the hottest topics that will be big bets for the near future:

    • AI

Once the stuff of science fiction, now part of the real world. Lots of commercial potential here, but how can this be best unlocked for consumers (and brands)? Current pathways to market are through tech companies, e.g. Amazon Alexa skills like Duplo stories or a Facebook chatbot. The real fun begins when digital is baked inside — which is a tough decision for companies to make, jumping off of a profitable s-curve into an unknown future. Tesla’s autopilot and Nest’s connected home give us hints, but for now we’ll just need to be satisfied with the A.I. we see in Westworld and hope that’s not what the world will become.

    • Voice

The evolution of human-computer interaction continues, from punch cards to keyboards, from mouse to touchscreen, and now from tactile to audio. The flip side of voice is that the microphones are always on, creating privacy concerns…but will consumers sell out their rights for convenience? Regardless of the outcome, it’s up to brands to do the right thing as this space evolves. Next step? Brain-to-computer connections. Yes, just like The Matrix.

    • Video

Moore’s law may not hold true like it used to and feature sets within mobile devices certainly seem to be plateauing. However, wireless bandwidth still has plenty of room for improvement (as does last mile connectivity), so video will continue to increase in importance as infrastructure improves. What’s critically important now is content and editorial — with unyielding watch-time algorithms, brands must capture attention as quickly as possible and hold attention like an eight second championship bull ride.

    • Personal data

GDPR is a huge current issue for brands and consumers are taking notice of the privacy policy updates they’re receiving from companies they forgot about years ago. In contrast example, the Cambridge Analytica situation highlights what can be done with personal data. Meanwhile, many marketers still struggle to attribute their efforts to sales. If a data-wielding company can influence the course of history, why can’t big budget brands figure it out?

    • Types of Reality

Virtual, augmented, and mixed reality are all taking shape as affordable hardware finds its way to market. Most content focuses on education and entertainment; once connectivity use cases become more prevalent, we will find ourselves increasingly living and working in a virtual world. Ready player one?

Our operating environment is constantly changing; however, the pace of change seems to be slowing down — at least that’s my perspective from returning to the client-side and seeing opportunities from this side of the table over the past couple of years. Most initiatives that were recently considered innovative, particularly social media marketing, have moved into the mainstream. Today, the foundations are being established for a new wave of enterprise-shifting digital trends that require significant assets to create and capture value.

O2O is an opportunity to outperform

The rise of e-commerce…and the problem it creates

2014 was a record year for ecommerce revenue. Sources estimate that US holiday season shoppers spent over $50 billion online, while sales in the UK exceeded £100 billion for the full year and totaled almost $450 billion in China for 2014. There’s no doubt that a percentage of this growth comes at the expense of offline stores and brands with multiple channels are struggling to decide how to support all outlets.

I'Park Mall

Enter O2O: “online-to-offline commerce.”

Since the rise of e-commerce in the 1990s, retailers have experimented with ways to connect dot-com to legacy offline stores. In those days, brands would occasionally offer web-only coupons that could be printed out and redeemed in-store. Twenty years after Amazon.com first went live, the most effective tactic for driving online eyeballs to offline stores is still the coupon, albeit evolved via Groupon and LivingSocial. Other contemporary O2O tactics are also derivative from the days before e-commerce existed, like publishing weekly sales circulars online as PDFs or highlighting a brand’s latest TV commercials on its website. It’s time for these tactics to evolve.

Retailers have been the earliest to embrace O2O, but digital disruption has impacted companies of all kinds, from advertising to venture capital. Uber and Lyft have changed the way people (and regulators) think about hiring cars. AirBnB and HomeAway have changed behaviors around renting a room for the night. Nest and SmartThings have changed how people interact with their homes. Warby Parker has changed how people shop for eyewear. Kickstarter and Indiegogo have changed how business ventures obtain funding. The list goes on and on.

Filene's

Risk adverse companies will take small, incremental, and defensive steps to integrate digital methods into their business models. These firms, many of them industry incumbents, will slowly fade away. Brands that survive and thrive will embrace three key principles of O2O:

1. O2O applies to three primary venues: retail, home, and office

Korea is one of the most wired countries on the planet and ground zero for O2O innovation.

In June 2014, Starbucks launched its Siren Order app in Korea, bridging the gap between office and retail by enabling customers to order and pay in advance. After a successful rollout, the app was rebranded “Mobile Order & Pay” for launch in the U.S. in December.

Starbucks Siren Order

Also in December, Burberry opened a “Burberry Beauty Box” store in Seoul, including an RFID-enabled “Digital Lip & Nail Bar” to help customers match products to their skin tone.

Burberry Beauty Box Seoul via Wardrobe Trends Fashion

Beyond retail and office, the “Internet of Things” has captured mainstream awareness and companies including SmartThings/Samsung, Nest/Google, and Quirky/GE are enabling digitally connected home environments.

Internet of Everything

2. O2O works best in both directions

O2O is most commonly an abbreviation for “online-to-offline” and the reverse should also be true. Circuit City, Borders, and Blockbuster have all disappeared after being unable to implement effective offline-to-online strategies. Today’s operating environment contains increasingly powerful personal computing devices, widespread broadband connectivity, and changes in consumer attitudes towards sharing and engagement.

Nordstrom Pinterest via Business Insider

Nordstrom takes advantage of these trends by investing in technology to enable sales associates to deliver more effective customer service, integrating in-store merchandising with social media content, and offering free wifi to improve in-store customer experience. Success – and perhaps survival – depends on merging channel service levels to deliver customer experiences that meet and exceed expectations.

3. O2O is a business strategy

Making O2O work effectively requires commitment and coordination across internal departments approaching programs as part of strategy, not as seasonal campaigns. A single department might champion O2O initiatives, but success requires collaboration from IT, supply chain, marketing, and customer service. The unifying focus for these efforts should be how to deliver the best user experience optimized for customer segments, supported by process improvements and technology infrastructure. Solid use cases are required prior to implementing O2O strategy.

CenterStage

For example, Samsung created a B2B product called CenterStage, displaying appliances in life-size 4K UHD at retailers including Best Buy, Dixons, and Boulanger, reducing inventory carrying cost and floor space typically required by traditional white goods displays.

Strategies can benefit brands in industries far beyond retail

Over the course of 2015, the lines between online and offline will continue to blur. As revenue from online retail continues to grow, brands must be careful to not get distracted by the larger opportunity. Brands that build their business models around an O2O approach will create consumer value in the three key venues of shop, home and office. These brands will be the best prepared to increase market share while defending existing business from new digitally disruptive entrants.

The “Big Six” digital marketing trends

I’ve been getting up to speed with Cheil’s global digital capabilities, visiting with our teams in Korea, the US, China, the UK, and India. In speaking with our professionals around the world, my beliefs are further confirmed that there are six key digital marketing trends that all brands must master in today’s operating environment:

  1. Brands are back in the driver’s seat.
    I’ve always believed that this notion was a bit sensationalist but today, organic reach has plummeted and brands with big budgets are the highest priority for sites with investors in mind.
  2. Everything is shoppable.
    From Instagram to Pinterest to Twitter to Facebook to YouTube, all sites are adding functionality to shortcut the path to purchase.
  3. Show me, don’t tell me.
    We have seen the shift from blogs to Twitter to emoji. People prefer snackable pictures to the fine dining of text.
  4. Data drives mass personalization.
    Curation and customization can happen today at a fraction of the cost to serve, but yesterday’s service models must evolve.
  5. The Internet of Everything.
    Just now beginning to become commercialized and show its true potential in the Age of Context.
  6. The sharing economy.
    Old business models and human behaviors are new again, but this time brands are powering their collaborative economy efforts with new technology.

While the impact of these digital marketing trends may differ by country and industry, they are all relevant now. The Big Six are here today and will absolutely evolve tomorrow. Smart marketers will get to the front of the curve and have a front-seat view as new trends emerge.

What’s in a name? #gTLD

What’s in a name? that which we call a rose
By any other name would smell as sweet;

– Shakespeare, Romeo and Juliet

With the rollout of new gTLDs, it’s just a matter of time until the .com addresses we have grown familiar with over the past 15 – 20 years start to disappear. Here are the domains that are available today and coming soon, via IANA.

Major brands and organizations have already lawyered up and brands like Gucci, Ralph Lauren, Oakley, USPS, Google, Amazon, and others are battling it out in the courts over new domains. I spoke with DomainSkate last week and their blog is a good resource; the company estimates that over 1,400 new domains will become available in 2014.

As if digital marketing didn’t change fast enough — here’s one more issue that marketers need to add to the to-do list; file under brand + SEO.

IBM bankrolls a new $100M #CX unit. Will it work?

IBMiX

Yesterday, IBM announced expansion plans for its Interactive Experience professional services practice. The numbers align a bit too perfectly: 10 new labs, $100M investment, and 1,000 new roles.

#IBMiX

While the numbers sound great, here’s what matters:

  • Access to technology. Brands need to connect with customers along all points of the buying/loyalty loop, same as it ever was. But today, engagement is impossibly inefficient without the help of technology. On the front lines, high tech enables high touch experiences. We could always assume that IBM services had access to the firm’s leading-edge research and this announcement includes specifics regarding influence analysis, intelligent customer profiles, and customer identity resolution, in addition to behavioral pricing, life event detection, and psycholinguistics analytics.
  • Global scale. In addition to four Experience Labs in North America, IBM adds 10 locations that provide presence on all continents with the exception of Africa and Antarctica. This allows the firm to match the operating needs of multinational clients, in addition to collecting local insights that can be transferred to broader programs. For example, consider the social media ecosystem in China, which has influenced the roadmaps of Silicon Valley-based platforms (and vice versa).
  • Ability to sign talent. Finding great talent that can pair campaign creativity with quantitative analysis is difficult, and constrained supply drives higher prices. IBM can afford to poach talent from other firms, as evidenced by its hires from Accenture, Wunderman, SapientNitro, DigitasLBi, CapGemini, and Ogilvy. IBM is the professional services equivalent of the New York Yankees.

But I wouldn’t consider the game over yet by any means. In fact, some of these strengths come with significant challenges:

  • Legacy branding. International Business Machines has a world renown legacy in enterprise hardware and the current software organization is also well-known. These groups capture the public’s attention with innovations like Watson and support of the US Open, which can lead to consulting business. However, internal corporate relationships could lead buyers to lean towards other firms that may not carry a perception of bias towards proprietary technology solutions.
  • You don’t have to be the biggest to be the best. Consider the change that technology has driven in the agency landscape; the traditional agencies with roots in the mad men era have been increasingly displaced by smaller shops that are nimble and can react to shifts in current culture. IBM claims to be a “new breed of service provider” but it must be careful that the positioning doesn’t become a Napoleonic mistake of creating competition on too many fronts. Moreover, IBM needs to operationalize knowledge from its global network without letting its sheer size get in the way of learning.
  • Fast enough? IBM isn’t alone in seeing the marketing opportunity around digital customer experience. Two years ago, Deloitte acquired Ubermind to create Deloitte Digital. Last year, Accenture acquired Fjord and formed Accenture Interactive. Good help is hard to find in this market, which is why SIs are buying digital shops to get in the game quickly. IBM has been hiring talent from the right places, but this one-at-a-time approach may not be a fast enough ramp, leaving money on the table for competitors.

IBM sees the market opportunity in customer experience and appears committed to winning in the market. There are a couple of elements in this announcement that take me back to 2008 as I launched my last company — “a new service provider that’s agency + consultancy” and a multi-million dollar funding commitment — and the emerging opportunity seems to be wide open. If nothing else, IBM is signalling to potential clients and hires that they’re open for business as the “social business” era fades into the next generation of digital transformation.

Why you should care about the rise of broadband

This is one of my favorite business charts.

 

Home broadband vs. dial-up, 2000-2013. Source: Pew Internet & American Life Project

 

As home internet has gotten faster, we have seen new business opportunities emerge. For example:

In 2000-2001, Quokka Sports tried to build a business of streaming sports like sailing online. In 2013, users could watch the America’s Cup and one of the greatest comebacks in sports history live, online, for free.

Traditional network programming has been living uneasily for the past decade as networked homes have spawned multi-channel viewing, while attempts at disruption have emerged from Apple and Google (hardware) and Netflix and YouTube (content).

The networked home is gaining traction; security systems have long been wired into phone lines, but with broadband we are seeing intelligent devices like thermostats, cameras, and door locks as well.

In 2006, right at the tipping point of dial-up vs. broadband, I heard a network television executive remark at an industry conference:

“With more broadband, people will get done with what they need to do online faster, then get back to watching TV. There are only a limited number of things a person can search for.”

In hindsight it’s clear that this person’s remarks were self-serving, maybe even intended as self-preservation. Laugh now, then consider this remark about gigabit-speed Google Fiber:

“What they’re doing is not any different than an overbuilder,” [Time Warner Cable chairman and CEO] Britt said on a conference call with analysts to discuss first quarter results Thursday. “And we’ve had overbuilders for the last several decades in the business.” 

Thinking that faster speeds are the equivalent of faster horses is myopic and an attempt to preserve the status quo.

Now, think about what we are seeing in the mobile world as devices get more powerful and networks get faster. The innovations we’ve seen in that space have only just begun. Brands would be wise to optimize for the present, but be prepared for the business models of the future arriving via faster connection speeds.

 


 

Review: The Connected Company by @davegray

Now, don’t get me wrong. This isn’t a book about finding and channeling your inner spirit animal or if your brand was at a party what type of guest would it be. This is a thoroughly researched and highly considered guidebook for designing organizations and making change management work. Dave’s section headers tell the story:

  1. Why change? Customers are adopting disruptive technologies faster than companies can adapt.
  2. What is a connected company? A company that operates not as a machine but as a learning organism, purposefully interacting with its environment and continuously improving, based on experiments and feedback.
  3. How does a connected company work? It learns and adapts by distributing control to the points of interaction with customers, where semi-autonomous pods pursue a common purpose supported by platforms that help them organize and coordinate their activities.
  4. How do you lead a connected company? Leaders must create an environment of clarity, trust, and shared purpose, while management focuses on designing and tuning the system that supports learning and performance.
  5. How do you get there from here? Any enterprise involves risk and connected companies are no exception. But in times of change and uncertainty, the ability to learn and adapt faster than competitors gives connected companies an edge.

Service orientation

One of my favorite sections of the book is a short section in Chapter Twelve (“Wrangling Complexity”) that describes how service orientation evolved in the programming community and its three key components. Then Dave uses that to explain why companies like Netflix and Whole Foods are successful. These explanations are present throughout the book to help explain why and how companies need to change.

Some things don't change

The things that customers care about won’t change. However, the way that companies organize and operate must change in order to survive. Dave says, “If you want to become a connected company, there’s no reason you can’t start today.” A great first step would be to order a copy of The Connected Company.

RFPs and strategic thinking

Business works best when designed around specific parameters of a market situation. For example, I’d advise against taking another company’s social media participation policy and adopting it wholesale. Or seeing a Facebook sweepstakes idea and running the exact same program, even if you’re in a different industry and geography. Or using a photo of your customer service team as your Twitter avatar because your industry competitors are using that approach. You may be thinking, “of course not.” So then why copy-and-paste a RFP without customizing for your own needs?

Buyers of social media services have benefited from the work of Maggie Fox‘s Social Media Group and creation of a Social Media RFP template. Unfortunately, too many lazy buyers have misused this source material; in the words of SMG themselves:

the Social Media RFP template is too long, has too many questions, and many clients and purchasing departments are simply cutting and pasting the content with little or no thought about their actual needs.

If you think the term “lazy” seems harsh, then why would smart companies be asking for credentials in podcasting, del.icio.us, and virtual worlds? Last time I checked, Second Life wasn’t high on any marketer’s list of priority platforms. Taking this kitchen sink approach is a disservice to both buyer and seller.

I’ve always been an advocate of creating solutions when uncovering issues – stay tuned. In the meantime, I’m interested in hearing about your experiences with social media RFPs from either side of the table.

Caveat emptor? Caveat venditor.

 

 

Groundswell and social business: moving towards maturity

Current state.

Yesterday I covered general updates to Groundswell and specifics around Twitter. The other major update to Groundswell focuses on attaining social maturity and provides a model where companies can self-identify and determine what’s needed to progress further.

Most companies are clustered around the middle of the bell curve when it comes to maturity, with the ultimate goal of becoming a social business. Forrester calls this the empowering stage. I’ve been discussing social business recently with Social Media Club San Francisco, at BlogWorld Expo New York, and in the original concept of social business design. With an understanding of the end goal, it’s important to focus on getting there, which is where most of my company’s work focuses today.

Here’s what I asked Josh about his findings on social maturity.

Most companies have gotten started with listening and talking, but the minority have moved on to more complex – and seemingly more valuable – objectives. What specific factors hold companies back from maturing?

Listening is effortless and low risk. Talking is an obvious extension of other forms of marketing. But energizing requires real thought about what customers want and who they are. Supporting means a commitment to care about and respond to customers. And embracing means admitting your customers sometimes have better ideas than you do. Those last three objectives cross organizational boundaries in sales, marketing, customer service, and product development. And crucially, they mean messy contact with the actual annoying humans that are your customers. You can do listening and talking without getting your hands dirty – the other objectives aren’t quite so comfortable.

Some social objectives are more popular than others

Which industries exhibit advanced maturity and which are laggards? Is there a difference in B2C vs. B2B?

We’ve seen a lot of maturity in retail, probably because they started with a lot of comfort with ratings and reviews on their sites. Marketing-driven and fan-centric industries like consumer packaged goods and media are also very advanced. Regulated industries like pharmaceuticals and financial services are typically less mature, just since they can’t get a lot of applications off the ground without talking to lawyers a lot.

B2B businesses have a great opportunity, because their customers form natural communities. Some tech vendors, like IBM and Cisco, are pretty far along. Most of the big consulting firms are good at internal social applications, since sharing knowledge is so much a part of what they do. But in general, B2B  companies are far less adventurous, and it’s a shame.

After the Groundswell.

Charlene and Josh collaborated on the original Groundswell and each wrote followup books. Charlene wrote Open Leadership. Josh wrote Empowered; here’s what I asked him about the sequel.

You wrote a book after Groundswell, Empowered. How do those work together?

Once we wrote Groundswell and I started traveling around to companies, it became clear that knowing what to do was only half the problem. How to get ideas past management was the other. Empowered is a book about how to manage your company in the age of the empowered customer – the problem that arises as a result of all those social customers. I find it interesting that Charlene Li, on her own, also wrote an excellent management book called Open Leadership about many of the same challenges.

Who’s the better co-author: Charlene or Ted?

That’s like asking which of my children I like better. Charlene has such an incredible instinct about social technology, and that, combined with her infinite degree of patience, made her a real pleasure to work with. Ted’s knowledge of how IT and management worked and the scintillating collection of ideas he brought to the project made for one of the most exciting experiences I’ve ever had. Both were highly creative, flexible, and understood well what I brought to the team. A collaboration on a book is like a marriage – you have to respect the other person, and you have to tolerate their quirks and hope they tolerate yours as you work closely together on something that matters. Both of my coauthors gave me that kind of intimate sharing of ideas, and I respect and love them both (equally!).

What do you know now that you wish was in the original version of Groundswell?

Much of that is in Empowered, the stuff about management. I wish we had more about Twitter (which is why we added that in the new edition). I really wish we had a lot more international examples, but as I learned in Empowered, it’s very, very hard to source those, especially ones from Asia.

 

Many thanks to Josh for sharing these insights. For updates on Groundswell and Empowered, visit Forrester’s blog.