Advancing Digital Transformation to Grow Better in China
With the challenges brought by COVID-19 and other geopolitical factors, new opportunities and industry patterns have emerged. It is now imperative for companies in China to seize these opportunities and accelerate their digital transformation agenda.
In our new report The 2020 State of Digital Transformation, Altimeter, a Prophet company, surveyed more than 600 executives, including 100 in China, about how they are pursuing digital transformation. The research revealed some distinct regional differences and highlighted the opportunities for companies in China to achieve uncommon growth.
What you will learn in this report:
Significantly more Chinese CEOs understand they are ultimately responsible for digital transformation compared to the rest of the world.
Yet CEOs in China often fail to communicate transformation as a top priority and don’t provide enough strategic guidance.
The top drivers of digital transformation in China are to build a more resilient and high-performance culture and operation.
Compliance concerns, resistance to change and budget are the top three challenges of digital transformation.
While the rest of the world is committed to five main technologies, Chinese companies are more diversified by placing smaller bets in more types of tech.
There is still much work to be done for Chinese companies to allow better collaboration across all departments and functions.
Chinese companies still trail other regions in making data use a core strategic component.
How to Effect Culture Change in Financial Services
By dialing up agility, empathy, inclusivity and curiosity, companies can inspire effective transformation.
Financial services companies have been pursuing transformation for years, but the events of 2020 have only underscored the need for these firms to rapidly evolve. In a few months, the world has achieved years of digital progress, shining an unflattering light on the many companies that lag. Many legacy financial services organizations, hierarchical and slow-moving, stand to lose as much as 35% of banking revenues to more tech-savvy rivals. That’s on top of an estimated $1 trillion in losses the sector may give up as a result of COVID-19.
Legacy companies are difficult to change by design. They were built for capital longevity and regulatory compliance, not agility and innovation. But they can’t afford to stand still. The ones that are making the most progress are moving forward at two speeds. First, they’re executing multiple plans at lightning pace to get teams and market positions back to “normal.”
Here we dive deeper into each of these pathways with some industry examples:
Defining the Transformation: Driving Clarity
This step establishes a unifying ambition that is powerful and actionable, and that appeals to all levels of leadership.
We recently ran research with hundreds of leaders to study the cultural levers of transformation, including 100+ from financial services companies, who were more likely than average to say that their initial transformational efforts are proving effective.
But there are still roadblocks. Financial services companies often stumble when developing a transformation mission that is clear and actionable throughout the organization. It’s essential for leaders to get key stakeholders throughout the enterprise on board with the transformation plan in order for it to succeed.
Capital One, for example, has achieved extraordinary success by committing to a clear technology mandate. With a rallying cry of ingenuity, simplicity and humanity, the mission makes as much sense to thousands of software engineers and cloud executives as it does to customer-service representatives. Not only does Capital One excel among its peers, but its recruiting clout is on par with the best tech firms.
Directing the Transformation: Adapting the Operating Model
Financial companies, with their complex hierarchies and sprawling brand portfolios, often find that changing their operating model to support these ambitions is daunting. It involves overhauling governance, processes, roles, systems and tools. But these changes are essential: All parts of the organization need to line up with this leaner, faster thinking.
“Many legacy financial services organizations, hierarchical and slow-moving, stand to lose as much as 35% of banking revenues to more tech-savvy rivals.”
American Express offers an example of successfully directing the transformation. When it decided to shift its operating model away from relying on merchant fees to increasing card use, it re-engineered itself so that all functions could support the company’s new goals. That means decisions can be made quickly and laterally, without hierarchical delays.
But others struggle, in part because once a plan is prepared, executives are reluctant to share those roadmaps throughout the business. Our research finds that financial services companies tend to restrict these blueprints to the C-Suite – only 34% make it visible to the broader organization. That guarded attitude impedes financial-services companies from successfully adapting their operating models. Everyone needs to know where the company is headed in order to direct the transformation
Financial-services companies do have some advantages, though. Compared to other industries, they are more likely to update their roadmaps often, with 42% evaluating progress on a weekly basis compared to 31% in other industries. They’re also better at developing key performance indicators – 78% believe KPIs were well executed and measured transformation progress well.
Enabling the Transformation: Building a New Talent Model
None of these changes can take hold if the right people with the right skills aren’t in place. That requires shaking up methods of finding new talent and developing skills and competencies among current employees.
This includes hiring a diverse workforce and learning to listen to what they say. Leaders “who are inherently inclusive and collaborative and encourage good ideas to surface from wherever” are critical, says Mary Ann Villanueva, head of brand culture and engagement at Citi.
Our research finds that financial services companies are somewhat more willing to train and upskill employees than other sectors. One recent home run comes from JP Morgan’s $11 billion annual investment in tech, including an army of 50,000 technologists. That powered it to record results before the pandemic and continues to fuel the company’s exceptionally resilient performance so far this year.
Motivating the Transformation: Inspiring the Change
This aspect of change requires leaders throughout the organization to bring the transformation plan to life. In companies that are successfully transforming, executives don’t just talk about change – they exemplify it in ways that inspire employees to become evangelists for the new ways of working. Above all, they cultivate a tolerance for failure. Missteps are inevitable and failure is where an organization often finds opportunity. When teams fear failure, they seek broad consensus, which slows decision-making.
“We’re trying to enable employees to fail on small things, such as experiments in the innovation lab, to achieve success on the big targets,” Trung Vu Thanh, head of digital banking for MB Bank Vietnam, tells our research team. “We’re trying to push to the limit and use innovation, as more ideas will help.”
It’s hard to find a better example than USAA in this realm. USAA is best known for its intense focus on families and pride in military service. But its commitment to customer-centricity is so deeply ingrained into the test-and-learn culture that employees submit more than 10,000 customer-experience improvement ideas each year. Almost 900 are so good they’re patented. (And 25 of them came from a security guard, who – like all employees – is also a customer.) It’s an organization that draws its strength and energy from trying to find new ways to excel.
Taken together, these four pathways – harnessing curiosity, agility, inclusivity and empathy – can help financial services companies navigate their transformation. They build deep cross-functional engagement and collaboration. When combined with a shared sense of purpose, they can follow the transformative path to uncommon growth.
If you want to learn more about how our expert team can help your company accelerate change by transforming from the inside out then contact us today.
Human or Abstract? Defining Your Conversational Brand Experience
Gender, name, visual identity and personality all factor into what a brand should sound like.
Consumers are becoming increasingly comfortable with voice technology. Digital assistants, whether chatbots or voice agents, can bring brands to life in new ways, adding personality, differentiation, warmth – and even humor. They can turn static digital experiences into dynamic conversations, deepening the connection between brands and their customers.
The Conversational Brand: Strategy for a Digital-First World report by Altimeter, Prophet’s research arm, outlines the key decisions to consider to bring a conversational experience to life. The report seeks to answer the following questions:
What is the role of the conversational experience in the broader brand portfolio?
How closely linked should it be to the master brand?
What use cases will it deliver on?
What benefits will it bring to its users and to the company?
If the goal of the conversational experience is owned by one product or channel, it may look and talk very differently than if its role is to represent the master brand and provide a connective thread across different touchpoints.
Human or Abstract: That Is the Question
First, one must decide how to design the persona –either human-like or abstract. The main factor that should influence this decision is the strategic intent of the conversational experience: is the goal to humanize the brand? To create a deeper relationship with customers? To stand out in the market with a relatable character? If the answer to these questions is yes, then a human-like persona may be preferred. If, on the other hand, the goal of the experience is to automate repetitive tasks, to increase the speed of transactions, or to simplify processes in the background, then an abstract persona may be preferred.
In practice…
When AXA asked Prophet to create a conversational experience, we aligned on some clear strategic objectives: deepen customer engagement while humanizing the AXA brand as it was making the shift from payer to partner. A human-like avatar made the most sense, and so Emma was born. We built Emma to become an empathetic navigator, helping customers easily navigate the journey – from accessing services and making claims to reviewing health information and checking symptoms.
“The experience is futuristic and high-tech to create a futuristic and high-tech identity.”
Choosing a human conversational identity is an approach other companies are finding success with, as well. For example, Microsoft recently announced that it would turn Xiaoice, its highly empathetic chatbot, into her own entity, paving the way for new licenses and ventures.
Microsoft has described this virtual teenager as “sometimes sweet, sometimes sassy and always streetwise.” She’s fond of joking with users, even offering encouraging advice on life and love. With 660 million users worldwide, Xiaoice works on multiple chat services and is trained on data that Microsoft gleaned through the Bing search engine.
In addition to its abstract Google Assistant, Google is developing Meena, a human-like avatar that observers expect to deliver the best conversational AI yet.
But for some purposes, abstract identities offer more possibilities. For example, Bixby, Samsung’s digital assistant, is designed to help customers unlock their Samsung devices’ full potential. Bixby is an always-on feature. But instead of simply following commands, it’s built to have conversations. It encourages exploration and offers insightful curation, all the while making the everyday tasks feel easier.
In other words, it acts as a users’ bright sidekick, bringing together more information than a human could possibly manage. And while the technology is friendly, its features are best expressed through an abstract experience, not a human one. The experience is futuristic and high-tech to create a futuristic and high-tech identity. Even its name is not human, which allows it to appear and perform consistently in markets worldwide.
Developing Your Brand’s Conversational Identity
Once a company has decided what type of AI assistant it will create, there are still many decisions to make in developing its identity. For example, we established guidelines for the many ways Emma communicates with consumers, allowing personality to shine through in every interaction. She is curious, smart and thoughtful, determined to help users take care of their physical, financial and emotional well-being. Even her physical appearance is distinctive: She’s an approachable Pan-Asian woman with a little French flair.
Often, these seem like minor details. But digital assistants are functional, transactional touchpoints that benefit from small, purposeful doses of personality, including:
Gender
Users expect a gender even in abstract assistants. If it’s not immediately apparent, they’ll often ask. Both Apple’s Siri and Amazon’s Alexa, for example, are positioned as vaguely female. And Samsung made this question a core part of the Bixby’s user experience, with devices prompting people to assign Bixby a voice that is either male or female.
Names
Even beyond suggesting gender, names are a key part of developing an identity. Some names sound young. Some sound formal. Choosing a too familiar name might at first make customers think they’re dealing with an actual human. And some names have specific class, geographic or even religious associations.
Visual Representation
Since users see these assistants while they are talking, aesthetic considerations are important. These questions go far beyond simple graphic design and are at the heart of strategic positioning. Should the assistant look like it is closely connected to the master brand? Should the visuals be able to translate into more extensive advertising efforts? Or can it take on new dimensions, possibly paving the way for new offers, markets and customers?
Personality
Customers will only respond to digital representations that are likable. Like in real human relationships, personality traits shape communication. Should it be bold? Curious? Serious? Funny? Thoughtful? Clever? A Gen Z customer expects a different type of conversation than a Baby Boomer does. Use cases also matter – customers probably won’t feel like joking if they’re sick or just lost their credit card.
But ultimately, the best choices all support the strategic foundation, turning digital assistants into brand allies. And built carefully, with thoughtful updates as more data is collected, they can spark growth and deepen digital connections.
When designing the conversational experience’s identity, merely finding an interesting avatar or mascot is not enough. It is crucial to consider the strategic imperatives to make the experience consistent with the master brand.
Interested in developing a powerful digital experience and virtual assistant for your brand? Contact us today.
Digital Transformation for Financial Services: Three Reasons to Hit the Gas
Legacy companies are moving faster, keeping up with their fintech competitors.
While the financial services industry is undergoing almost constant transformation, fintech startups drive most of it. As these rising stars continuously find new ways to introduce customer-centric innovation, incumbent financial institutions are struggling to keep up. “The 2020 State of Digital Transformation,” a new report from Altimeter, a Prophet company, finds that even as these tech-savvy newcomers surge to record valuations, 68% of traditional financial services companies report that they are only in the early stages of digital transformation. And they say that COVID-19 has slowed their progress even further.
While validating the obstacles many legacy companies face as they navigate their way forward, this research makes clear that this is no time to slow down. The sooner companies lean in and accelerate digital efforts, the more revenue and market share they can reclaim from newcomers.
Fending off the fintech onslaught
There’s no doubt that capital markets are favoring these fintech startups. In 2019, KPMG reports that investment hit $135 billion. These companies are growing in scale and revenue, with 68 achieving “unicorns” status, a valuation of at least $1 billion, as of this past September, according to CB Insights. And while they span consumer banking, payment solutions, insurance technology and trading, they have plenty in common: They’re disruptive, customer-centric and digital to their core.
Chime, a neobank startup offering digital cash management services and debit cards, is one of our favorite examples. It has tripled its transaction volume and revenue this year, achieving a $14.5 billion valuation.
“The sooner companies lean in and accelerate digital efforts, the more revenue and market share they can reclaim from newcomers.”
And Robinhood, a commission-free brokerage platform, saw daily average trades skyrocket to 4.3 million in June, surpassing all traditional brokerage firms. Among the household names left in the dust: TD Ameritrade, with 3.84 million, Charles Schwab at 1.8 million and E-Trade at 1.1 million.
But some traditional banking institutions, such as Marcus, Goldman Sachs’ consumer banking platform, have also seen rapid growth during the pandemic. It’s grown to more than $27 billion in savings from 500,000 customers, indicating that even legacy companies can successfully transform into digitally-powered institutions.
How legacy companies can catch up on digital transformation for financial services
Altimeter’s report delves into how incumbents are trying to catch up. Based on an in-depth survey of 600 executives, including 137 in financial services, three clear imperatives emerge.
1) Move faster. The majority of financial services firms are still early in their digital transformation journey.
Altimeter’s research measures digital transformation through a five-stage model. First, companies make their case for investing in digital. Next, they develop foundations for more comprehensive investment, seeking to understand customer journeys and improve employees’ digital skills. From there, they build operations, digitizing them at scale. Fourth, they integrate these platforms to use data more strategically, and finally, optimize for growth, leveraging data and AI for great customer experiences.
Only 25% of the companies in our study have moved beyond this to the final two phases. Financial-services execs say they are moving even more slowly. Some 68% say their companies are still in the first two years of their transformation journey, and only 38% say they’ve reached the third phase (building operations). That compares to more than 50% of healthcare, tech and retail companies.
And that’s far too slow for consumers. The latest banking satisfaction research from J.D. Power, for example, shows that the more digital the customer, the more significant the satisfaction gap. And dissatisfaction is highest among Gen Z customers, a fast-growing demographic.
2) Make new ways to reach customers a higher priority
Optimizing internal processes is a compelling reason to pursue digital transformation, named by 40% of respondents and 33% name responding to COVID-19. And to create the resilience to navigate the current economic and health crisis, financial service executives recognize that their digital transformation should focus on improving operations and enable them to operate in a more agile and flexible way.
But our data suggest that these companies should give more weight to the many ways digital transformation could provide firms with opportunities to reach customers through new digital channels, particularly as more consumers look to engage primarily online.
As the market continues to change, and consumer preferences and tendencies evolve significantly due to COVID-19, financial services brands are picking up on the need to leverage advanced technology and data to become more flexible and agile.
Transformation has not been easy, given legal hurdles and inherent resistance to change. And COVID-19 is creating new challenges. With urgent demands for supporting remote work and developing digital marketing and selling tools, the pandemic has hijacked many corporate priorities. In fact, 45% of our respondents say pandemic response and related budget considerations are the most significant challenge they face. And of course, traditional obstacles like risk management, resistance to change or rigid structures haven’t gone away.
The global economic and health crisis has impacted the way we think about digital transformation. This research underscores questions leaders within these companies should ask, to accelerate the transformation and achieve growth.
How has your organization accelerated or reprioritized its digital transformation initiatives in response to the current environment?
What obstacles are you encountering as part of that acceleration?
Is your agenda building greater operational resilience for your business?
Prophet’s financial services practice has been partnering with many clients in accelerating their digital transformation journey. Please contact us to learn more.
Five DTC Growth Moves to Optimize Your Investments
These 10 real-world examples will show you how to optimize your investments in the rapidly shifting direct-to-consumer landscape.
For the right investors, the rapidly shifting direct-to-consumer (DTC) landscape presents plenty of possibilities. Many of these digital natives are just one cash infusion away from dominating their category–as long as they make the right strategic DTC growth moves.
“We find companies that have the potential for market disruptive growth and profitability, and the positioning to generate the most likely–and fastest–returns on investment.”
The pandemic-fueled surge in all things e-commerce is pushing many to record sales, with business booming at companies like Peloton, Quip and HelloFresh. But not all DTC companies have the same growth potential, and there have been plenty of notable flame-outs. In our work for funds looking to make DTC investments, whether it’s in due diligence or consulting on the use of funds post-transaction, we’re intent on optimizing investment. We find companies that have the potential for market disruptive growth and profitability, and the positioning to generate the most likely–and fastest–returns on investment.
Beyond assessing fundamentals, including how well possible targets have penetrated their customer base, brand staying power and competitive moats, we zero in on potential, based on specific growth moves. We’ve seen that companies with the ability to lean into these five strategies have the best chance to achieve uncommon growth.
We look for companies that are ….
1. Continually Tapping Unmet Needs
The most successful DTC brands started with an unmet need, filling some area of behavioral white space. Millennials, for example, wanted to start investing but felt ignored. Companies like E-Trade and Charles Schwab seemed like their parents’ tools. Robinhood, with its “investing for everyone” credo, stepped in to draw millions of new stock-market investors, with impressive (and occasionally controversial) results.
Lemonade
Our favorite example is Lemonade, which has used behavioral nudges and machine thinking to become the most disruptive force in homeowners, renters, condo and now pet insurance. In return for signing the honesty pledge, customers get transparent prices and lightning-fast service. While many Gen X and older customers may not have heard of it, young people love it. “I just bought insurance on Lemonade,” one of my young associates told me the other day. “And the user experience was freaking awesome.” Has anyone ever said that about insurance until Lemonade came along?
2. Ending Churn Through Customer Obsession
Given the massive spending needed to acquire customers, the strongest brands are those that maximize that investment. Strong retention requires a shift in focus from product obsession (the natural starting point for so many DTC companies) to true customer obsession.
Stitch Fix
Stitch Fix is continually updating its offer, finding new ways to please existing customers and new customers to please. Its core offer is a fashion fix with five carefully curated choices, and millions love how the personalization gets more accurate over time. But many don’t want to shop this way. So it recently introduced Direct Buy, enabling old and new customers to dive deep into single categories, boosting incremental sales.
3. Uncovering Value Through Deep Customer Analytics
The fastest-growing companies are those that do the most with their data.
Looking closely at questions of price elasticity, for example, can make all the difference in expansion, particularly in new territories. And while this has long been the promise of DTC companies, the reality is that the more data they collect, the less likely they are to use it. IDC estimates that about 90% of what businesses collect is “dark data,” and never used at all–let alone effectively.
Canoo
So we pay close attention to those that dig into data in every channel. Canoo, for example, is so expert at harnessing tech and innovation insights that it’s poised to launch its electric vehicles after 19 months, not five years. And based on analytics, it’s confident that higher-end consumers will love its subscription-only model, with as little as a one-month commitment.
MeUndies
Another data-savvy company is MeUndies, which has used what it’s learned from social media to sell more than 10 million pairs of underpants. Even rarer for DTC companies, it’s been profitable for three years.
4. Finding New Adjacencies
While many DTC brands build their business on a single product, they eventually need to expand to keep growing, either geographically or by adding new categories. This is a moment when many need more cash, new investors or the ability to acquire or partner with other companies.
Casper
Broadening offers while maintaining category credibility often comes down to the right messaging and positioning. Casper, for example, launched in 2014 and quickly became successful. But as competitors piled on, it’s needed to find new ways to expand. With a promise to become “the Nike of sleep,” it now sells pillows, sheets and weighted blankets. But more importantly, it positions itself as the expert on sleep wellness.
Airbnb
Similarly, Airbnb recognized that it could find growth by moving beyond lodging and selling experiences that make people want to travel. From sushi tours of downtown Tokyo to paddleboarding with sea lions, these adventures are adding millions in revenue. (When COVID-19 struck, they also provided a quick pivot to virtual experiences.)
5. Partnering Strategically to Scale the Ecosystem
Headspace and Spotify
Finding partners is a way to access new customers and stay relevant. Headspace, the popular meditation app, has increased its influence exponentially by partnering with Nike, Spotify and the NBA.
Everlane and Nordstrom
Retail is an obvious choice and can be a game-changer. Even non-digital consumers can discover brands like Native, Harry’s, Barkbox and Quip at Target, for instance, or find Everlane and Birdies at Nordstrom.
Alo and Animal Crossing
Others leverage pop culture. Alo, a yoga company, and Tatcha Beauty teamed up with Animal Crossing for product launches within the popular video game.
Allbirds and Adidas
The partnerships that we believe spark the most growth are those that combine scale and purpose. Allbirds, which has built its impressive valuation on sustainable fashion sneakers, recently partnered with Adidas, which has been trying to increase visibility for sustainability efforts. Interestingly, this unlikely partnership with competitive brands introduced a collaboration that pairs Allbirds’ innovative approach to materials with Adidas’ marketing and manufacturing might, and is set to produce the world’s first carbon-neutral performance shoe next year.
As they sift through DTC companies, investors should look for potential targets that can make some (or all) of these five growth moves. These are the nimble brands that can unlock the fastest returns for investors and find exceptional growth for themselves.
Prophet is obsessed with helping clients win with their customers and unlock uncommon growth in this digital age. Contact us to learn more about what we are doing in all things direct-to-consumer.
Rarely have organizations been forced to tackle volatility in so many areas all at once until the global coronavirus pandemic, demanding many to evolve in ways they hadn’t previously considered plausible, or possible to accomplish in such short timeframes. With the right approach, however, the gravity of the current situation can become an opportunity, a slingshot to accelerate transformation and speed an organization’s course to a more resilient future.
From witnessing the lightspeed changes being made in organizations around the world over the past few months, the latest report from our Organization & Culture experts – The Slingshot Effect – lays out the specific shifts organizations need to make now. With the right processes, commitment, workforce and mindset, others can learn how to ‘slingshot’ their organizations’ transformation, build the flexibility to thrive on change and the agility to respond to any future shocks faster.
In this report you will learn:
Why taking a human-centered approach remains a key element in any successful transformation
How to determine the most relevant shift in order to build resilience where your organization needs it most
Where to prioritize action and guidance on what to do next
Examples of how other companies are moving forward
Webinar Replay: Common Mistakes in Acquiring a Healthcare Startup
M&A offers healthcare companies an ideal way into disruptive tech. Here’s how to make sure deals go well.
58 min
Watch the webinar replay to hear from a panel of CEOs from leading startup incubators, where they discuss common mistakes large healthcare companies make in acquiring startups.
Webinar panelists include:
Jamey Bradley Edwards, Co-Founder & Chief Executive Officer, Cloudbreak Health
Webinar Replay: How to Take Your Brand DTC in 2021 feat. Canoo
In the wildly disruptive electric vehicle market, Canoo is pushing boundaries. Take a peek under the hood.
56 min
In this webinar, we hear from Prophet’s client Canoo, an award-winning electric vehicle subscription service. Bob Wolfley (Marketing), Lucy Ross (Subscription & Pricing) and Veronica Shea (Content & Communication) share how the brand redefined urban mobility and navigated the COVID crisis with a refreshed DTC approach.
Prophet is obsessed with helping our clients win with their customers. We are a global consulting firm, helping our clients unlock uncommon growth in this digital age. Contact us to learn more about what we are doing in all things direct-to-consumer.
How Internal Podcasts Can Liberate Your Employees with Prophet’s Mat Zucker
Mat Zucker inspired the idea for this mini-series when he interviewed Lindsay from Casted for an article he wrote for Forbes about internal podcasting. He has been a fan of podcasts for years. In fact, he’s been creating brand podcasts since the ’90s. This mix of passion and experience gives him a unique perspective when it comes to use cases for podcasts in the world of brands. In his experience, most use cases are usually for external brand podcasts. But with the rise in training and communication within organizations, Mat saw the opportunity to explore how internal podcasts can be a valuable asset to businesses.
In this episode, Mat dives into trends that he has seen in using podcasts internally to build a stronger community and connection inside the business.
Webinar Replay: B2B Leaders Series feat. Zurich & Maersk
Digital transformation offer special challenges for B2B companies. But there are more opportunities, too.
56 min
Watch the webinar replay in which you’ll learn the challenges and opportunities that B2B organizations face in undertaking transformation on a large scale. The discussion features Lindy Hood, SVP, Chief Customer Officer at Zurich North America, Sonny Dahl, Global Head of Customer Experience at Maersk and Fred Geyer, Senior Partner at Prophet and will include lessons learned in accelerating forward momentum as well as how COVID has impacted their transformation plans.
Two of the featured speakers, Fred Geyer and Joerg Niessing, co-authored ‘The Definitive Guide to B2B Digital Transformation’. Get your copy of the book here.
If you have any questions or would like to learn how our Marketing & Sales practice helps clients identify a clearer path to a digital transformation that powers growth with real and measurable results, contact us today.
The Acceleration of Digital Transformation in Europe
Our research shows that employee collaboration and a new kind of agility are fueling regional gains.
Every January, the Prophet team sets out our predictions for what the year ahead might bring. This year one of the predictions we made was that 2020 would be the year when failed digital transformation initiatives would face a reckoning.
And then 2020 happened.
Since COVID-19 first emerged in Asia at the start of the year and then took hold in Europe in March, we have lived through a period of dramatic change – the pace of which nobody could have predicted.
In the 2020 State of Digital Transformation report, my colleagues at Altimeter, a Prophet company, have surveyed leaders across the globe to understand how their organizations are responding to the shifts and trends that are shaping how they transform. For those of us in Europe, it provides a fascinating snapshot of the way coronavirus has dramatically shaped the role technology plays in transforming businesses.
Agile Becomes More Than a Buzzword
One of the most significant shifts in this year’s study is the key drivers of transformation efforts. In 2019, the top driver for digital transformation was growth opportunities in new markets. But in 2020, in reaction to the global pandemic and the associated economic pressures, leaders have shifted their focus to operations.
It is in this area we see one of the key differences between the leaders of transformation efforts in Europe and their North American peers. In North America, the top transformation driver is increasing productivity and streamlining operations (41%), but in Europe, the need to work with greater agility is more likely to drive transformation efforts (35%).
“It has become vital for organizations to become more digitally mature.”
The need for agile business practices is particularly pressing in Europe, which experienced a faster and deeper lockdown than North America. This lockdown has required leadership to adapt its transformation efforts to address rapidly shifting customer demands.
Europe Leads the Way in Employee Collaboration
COVID-19 has accelerated the need to shift to virtual ways of working, which has been mirrored by a boom in virtual collaboration tools. The 2020 State of Digital Transformation report shows that Europe is leading the way in this area, with 58% of respondents reporting that platforms to enable employee collaboration was either a top strategic objective for digital investment, or that employees frequently connect over digital platforms. This is particularly pronounced in Germany, with 65% of respondents in the top two levels of employee collaboration and engagement.
Seamless Experiences Command a Price Premium
The rapid adoption of digital technologies throughout the pandemic has shone a light on the points at which experiences break, with issues around technology being the most commonly received complaint.
The 2020 State of Digital Transformation report reflects this, with 52% of respondents reporting that they were yet to achieve a seamless sales and service experience.
But the benefit of doing so is also clear, and it’s an area where Europe leads the way, reflecting a relatively higher adoption of digital tools for sales teams.
29% of European respondents reported that they were able to charge a higher price premium as a result of offering a seamless sales and service experience online, compared with only 15% in North America and 9% in China.
The global pandemic has undoubtedly changed our relationship with technology, and many organizations cite it as a key driver of their own digital transformation.
As we begin to think about the “new normal” shaped by the global pandemic, it has become vital for organizations to become more digitally mature. The 2020 State of Digital Transformation report provides organizations with the opportunity to measure and benchmark their stage of digital maturity.
The report also offers encouragement for European organizations planning for what comes next. EMEA-based organizations are twice as likely as ones in North America to be at the highest stage of digital maturity. Because they have built a strong digital foundation, their focus is now on leveraging data and AI to create great customer experiences.
The COVID-19 crisis caused a major upheaval in the first half of 2020. Within weeks, organizations made drastic changes that were expected to take years, like shifting employees to remote work and digitizing customer offerings. The digitization of organizations that was previously anticipated to take years happened in a matter of days.
There is now more pressure than ever for digital to perform in ways that can power meaningful business transformations.
This year’s annual State of Digital Transformation report:
Examines how organizations pursue digital transformation, analyzing differences based on digital maturity stage, industry, geography, and organization size.
Examines the impact of COVID-19 on digital transformation efforts.
Offers a comprehensive benchmark of digital maturity across five areas that define customer-focused digital transformation: Leadership and culture, customer experience, marketing and sales, technology and innovation, and data and artificial intelligence.
The report has four major takeaways:
Operations support, agility, and revenue are top priorities given COVID-19. The lead use cases are working from home (82%); digital marketing (78% investing to improve); digital selling (76% trying to close compatability gaps); virtual product/ service delivery (52%); and growth initiatives (37%).
The more digitally mature the company, the more they are focused on responding to and taking advantage of the COVID-19 crisis. The less digitally mature the company, the more they are working on implementing digital basics.
Digitally mature companies are maintaining their strategic focus despite the pandemic; they focus on digitally-driven innovation, incorporating a new wave of technologies with an intensity that is outpacing the market.
Leadership from CEOs and CIO/CTOs — supplemented by CDOs, Innovation Officers, and Boards — helps ensure firms chart and follow their digital transformation ambitions.
