Digital Transformation: Where are You Now and Where Do You Need to Be?

We hear a lot about digital transformation and disruption, with boards pushing CEOs to “become digital” and completely rethink their business models. Geoffrey Moore provides an interesting framework for thinking about digital disruption as a continuum or serious of steps with firms having different starting points based on where they are in their life cycle: 1. new entrants incubating and scaling a truly digital business model, or 2. established companies that are modernizing and already scaled “industrial” model. 

Regardless of your starting point, creating and building a strong analytics competency is essential to remain competitive.  His point is that digital is data.  And when we talk about disruption, it’s about how companies use data and analytics to create new business models or services.  

Moore sees competitive firms in the future as those able to read the “signals” from customer data:  

“In the digital economy, such signals live at the intersection of two types of datasets—systems of record, which capture transactional data, and systems of engagement, whose log files capture all the peripheral interactions that occur in and around a transaction.”

Getting to this point requires climbing a series of “stairs” to reach the point of digital disruption. But first you need to figure out where you are now. 

Climbing the Stairs to Digital Disruption

According to Moore’s model, there are five steps that firms must ascend, with each corresponding to their digital IT maturity:  1. systems of record, 2. systems of engagement, 3. engagement analytics, 4, systems of intelligence and, 5. systems of disruption.  

Here’s a quick synopsis of each phase:

  1. Systems of Record:  ERP and CRM systems provide a single view of the customer and streamline the quote to cash process.  Key challenge – systems are still organized around the products, and they make it difficult to get a single view of the customer.
  2. Systems of Engagement:  Mobile applications and omni-channel communications improve customer experience, reduce time to transact, and eliminate disintermediation. Key challenge -- if systems of record are  behind in their "accommodation of customer-centricity," according to Moore, “you now have a ‘two-stair’ challenge ahead of you.”
  3. Engagement Analytics:  Dashboards and reports extract insights from Systems of Engagement about customer preferences, market trends, systems inefficiencies, and user adoption.  Key Challenge – at this phase you still have “human-in-the-loop computing,” that relies on people being able to "detect patterns and infer relationships.”  Innovation still moves at “human-centric pace.”
  4. Systems of Intelligence:  Machine learning detects near-invisible correlations, infers causation, enables prediction, and proposes prescriptions, in order to optimize all types of interaction. Key Challenge -- You need the right talent to “secure the data science expertise to work the algorithms, and then you need to get access to enormous amounts of data to feed the beast.”
  5. Systems of Disruption:  Systems of Intelligence leverage proprietary insights to disrupt inefficient markets with novel digital services.  Key Challenge -- getting through steps 1-4, which ultimately may require a new infrastructure model, a new operating model, and a new business model.

Moore posits that today most established companies operating in more traditional industries (i.e. not the digital natives) are somewhere between systems of record and systems of engagement, with a smaller number of innovators reaching Stage 3 - Engagement Analytics. He warns that established companies need to be firmly at stage 3 by the end of this decade or face a real existential crisis.

The "Two-Stair" Challenge

So, are you facing a two-stair challenge today?  Based on Moore’s framework, the degree of “customer-centricity” you have now in your systems and processes is a good indicator.  Firms that have attained just the systems of record level tend to be more inwardly focused on efficiency and less externally focused on effectiveness of customer interactions. Readjusting your focus externally and understanding your customer using historic transaction data and the “interactions that occur in and around a transaction,” is the key to accelerating your ascent to digital disruption and maintaining competitiveness in the new digital economy.

In our latest eBook: The New Customer Experience: Using Data and Analytics to Drive Digital Transformation, we discuss the key elements of the new B2B customer experience; the four common barriers to digital transformation; your essential analytics toolset; and how to get started down this path using feasibility studies to gauge where you are now and where to invest next in your digital journey. 

 

Photo via VisualHunt