How to Unlock Uncommon Growth in the New Digital Era

Digital transformation is one of the most closely followed topics in the world today. And in China’s distinct and fast evolving landscape, digital transformation is even more important. In the past few years, the tech giants BAT (Baidu, Alibaba, Tencent), JD and some of our most recent tech unicorns including Didi Chuxing, ByteDance (TikTok and Toutiao), RED and Meituan Dianping among others, have led the first wave of digital transformation. Now, we are entering the ‘second half’ of the digital revolution, where more traditional businesses are transforming themselves to become more digitally-led to compete and thrive.

Prophet’s digital research arm, Altimeter, recently published The 2018-2019 State of Digital Transformation report, aiming to capture the shifts and trends that are shaping modern digital transformation, globally and in China. We surveyed 554 digital strategists, C-suite and other executive-level leaders from organizations with at least 1,000 employees, across three geographies: North America (US and Canada), Europe (UK, France and Germany) and China. Our global study revealed insightful differences between businesses operating in China, and those in the rest of the world, on how they think of and approach digital transformations.

Altimeter identified ‘The Six Stages of Digital Transformation’ to help companies understand where they are — and where they need to be — on the road to digital transformation

In this article, we will discuss some of our observations and findings as well as implications on how to drive digital transformation and unlock uncommon growth in China.

Digital transformation is no longer an option, but an enterprise-wide initiative that is increasingly led by the CEO.

Our study demonstrates that almost all companies around the world, and even more so in China, are undergoing some sort of digital transformation. Digital transformation is no longer an option but a crucial component in any business growth strategy. In China, 89% of the companies interviewed are undertaking cross-disciplinary and enterprise-wide digital transformation, higher than the rest of the world.

Q: Is your organization undergoing a formal digital transformation effort in 2018?

In the past, it’s oftentimes the CIO/CTO that leads digital transformation initiatives. Nowadays, they are increasingly led from the top. 42% of the companies in China said that their steering committee for digital transformation is led directly by the CEO, which is significantly higher than what we found in other countries (29% in rest of the word).

Q: Which role or group does the steering committee primarily report to?

Companies in China are ‘playing offense’, using digital transformation as a way to differentiate, drive revenue, enhance customer experiences and acquire new customers.

When we asked which departments are prioritized in their digital transformation efforts, Chinese companies compared to the rest of the world are far more focused on digital transformation in the space of marketing and customer experience (83% of digital transformation in China touch customer experience, 58% marketing, 75% e-commerce, compared to 32%, 40%, 23% respectively). China is also applying and directing digital transformation towards product and innovation, far ahead of the rest of the world.

However, Chinese companies seem to be putting less emphasis on its digital transformation behind internal efforts such as HR, employee and legal.

Q: You mentioned that your role directly supports the digital transformation of a specific business unit. Which business unit(s) do you support?

This orientation of digital transformation toward external factors over internal efforts is closely linked to China’s highly competitive digital ecosystem and dynamic market landscape. To serve rapidly changing consumers and respond to a fast-moving and innovative environment, businesses in China use digital to stay competitive. Every industry has to keep up and evolve – retail only exists as “new retail,” finance is simply fintech and manufacturing is all about IoT, robotics and AI-powered solutions.

For companies in China, digital transformation is all about ‘playing offense’ and driving a competitive edge. Digital transformation helps identify growth opportunities (62% in China versus 48% in rest of the word), it helps understand consumer behaviors and preferences (50%  versus 45%) and it helps respond to increased competition (45% versus 40%).

On average, global firms tend to use digital transformation as a means to drive operational efficiencies, whereas China tends to focus its digital effort to drive customer demand and experiences.

Q: What are the key drivers of digital transformation within your organization?

The drive for growth is clearly reflected in Chinese companies’ long-term priorities of digital transformation as well. When deep diving into the areas of focus for their transformation, one can clearly see how CX and customer data strategy dominate the agenda. While 62% of the firms in China are investing in IT and technology to better manage data, a third of companies in China are still finding their way to design new and improved customer experiences, to integrate better and make e-commerce more intuitive, to improve the agility of their operations.

It is worth noting that organization and internal transformation is relatively low in terms of priorities for many Chinese companies, compared to CX and other growth-centric efforts.

“For companies in China, digital transformation is all about ‘playing offense’ and driving a competitive edge.”

Q: Each of the following describes different types of digital transformation initiatives. Please indicate which initiatives are most important to your long-term digital transformation efforts. (Data shown above is from China respondents only)

As high as 74% of the Chinese companies interviewed are in the process of (28%) or have completed (46%) mapping out the customer journey.

BAT or the like of Didi have raised consumers’ expectations. Any consumers interacting with a brand and business expect fluidity, just in time, total personalization, and complete integration cross touch points and interactions.

Q: Which of the following best describes your company’s efforts around the customer journey/experience?

Companies in China see ROI and budget as bigger challenges than organization and culture.

As companies in China evaluate whether to increase investments in digital, they expressed concerns about the lack of data and ROI. In fact, 61% of companies in China expressed concerns over the lack of data and ROI, while only 34% shared concerns with budgeting. While external factors clearly motivate companies in China to transform digitally, they are less worried about internal facing ones compared to the rest of the world.

In other countries, a lack of clear vision (18%) and company culture (23%) pose major challenges for companies. Whereas in China, these numbers are substantially lower, at only 11% and 6% respectively. This again signals the confidence and determination of businesses in China to drive forward digital transformation despite internal obstacles. The top-down cultural norm in China and the fact that many employees are digital native and fluent as consumers, provide businesses a competitive advantage, being more intentional and more rapidly willing and ready to transform.

Executive Summary

• Over the past decade, China’s growth and technology transformation has been led and fueled by BAT (Baidu, Alibaba, Tencent). We are now entering the next chapter of digital transformation where businesses and brands must adapt and lead their own digital transformation to compete and thrive.
• In China’s unique digital ecosystem, almost all companies are undergoing digital transformations. Compared to other countries in the world, Chinese enterprises embrace digital transformation in a more proactive way—with CEOs playing a bigger role in leading the effort.  Additionally, companies in China prioritize consumer-facing touch points, such as customer experience and e-commerce, to a significantly higher degree in their digital transformation.
• It is worth noting that having a strong organizational culture is instrumental to sustainable growth. However, companies in China are overwhelmingly more concerned with ROI than internal initiatives like organizational structure and employee engagement. While a driving customer-centric growth is a competitive advantage for companies operating in China, internal organization, way of working and company culture are also essential enablers for tapping into the Body, the Mind, and the Soul of the organization. Another global study by Prophet, Catalysts: The Cultural Levers of Digital Transformation, argues that organizational culture and the employee experience have a vital part to play in shaping progress. As a result, the human factors in digital transformation have grown in prominence.

We believe, in order for businesses to win with digital transformation, they must adopt four necessary shifts in mindset and way of working:

1. From being technology-focused to being customer-obsessed

Technology is a means, not an end. Investing heavily in IT or data systems is undoubtedly important. However, without deep understanding of your target audience, you are just doing digital for the sake of digital. Businesses must leverage digital approaches and strategies in a smart way to identify, understand and serve their customers in a more agile and profound way.

2. From tech-led sponsorship to multidisciplinary sponsorship

Digital transformation is instrumental to the future of any company, and how business will operate. CEOs must play a pivotal role in driving the transformation agenda forward.  The CEO must clarify the strategic roadmap, drive cross-disciplinary collaboration, coordinate resources, and encourage trial and error across the organization, to experiment, learn, to codify and ultimately scale up.

3. From investing in operations and touch points only to investing in people and culture

The growth of a business and brand is deeply rooted in its internal capabilities and the company culture. This is especially true in the digital age where a company’s organization, people and culture need to be more agile and adaptable. However wonderful the digital infrastructure or system is, the capability of the team (the mind), the mindsets (the soul), the new operating model (the body), anchored on a clear purpose (the bigger Why, the firm’s DNA), are what matter in delivering truly effective, winning digital transformation.

4. From regarding digital transformation as a cost center to keep up, to thinking transformative investments to achieve uncommon growth

Although digital transformation requires significant investment, the outcome will be extremely beneficial if successful. Instead of worrying about the cost, identify clear objectives and benchmarks to continuously measure ROI and impact on revenue growth and profitability, while adjusting investment accordingly. After all, digital transformation is not a ‘whether or not’ question, it is a must have, must do.

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If you are leading a digital transformation effort, you know how important it is to get executive buy-in. Yet many leaders have only a tangential grasp of what it means to be “digital” and shy away from getting their hands dirty. Altimeter found that low digital literacy or expertise among employees and leadership was the top challenge facing digital transformation initiatives. What’s frustrating is that while there is a plethora of training and development options, most executives still hang by their fingertips.

The problem is that most of the training programs focus primarily on the “what” and the “how”. What is digital transformation, What are the latest trends and business models you need to know (platforms, virtual reality, 3D printing, etc.), How do you use digital tools to engage with customers and employees, How do you lead a digital transformation process. But without the “why”, two things happen — they either never engage, or they see the potential but other priorities eclipse that early enthusiasm and digital fall to the wayside.

“The solution is to make digital transformation matter to each executive personally.”

The solution is to make digital transformation matter to each executive personally. I have been working with executives on their digital and social efforts for the past decade and the only successful, sustainable programs are those that continually reinforce the “why” of digital transformation.

5 Tips to Better Train & Develop Executives on Digital

Here are five tips on how to design or retool your digital training and development programs to ensure not only that executives develop a digital mindset, but that proactively seek out ways to improve their digital literacy.

1. Tie digital to strategic objectives. Start with what is already a priority for every executive — the strategic objectives that they are on the hook to deliver. Identify how digital could help them achieve their strategic goal better, faster, more efficiently. There is not a single function or role that is not being impacted by digital — they key is to figure out why digital is important to each person. For example, if top line revenue growth is an objective, how can digital accelerate the decision making process with a target customer set?
2. Put digital metrics on the executive dashboard. Every executive has a dashboard by which they measure their success. Having identified where digital can have an impact, include a few relevant, personalized digital metrics on the dashboard that connects digital to those strategic objectives.
3. Enable peer mentoring. There is safety in numbers, and executives are no different. Hearing what’s working — and what’s frustrating — from their peers will give them the confidence and courage to try new things. Formalize the mentoring with “accountability partners” and make digital mentoring an item on the regular executive meeting agenda. Watch out for “reverse mentoring” where a lower-level (and typically younger) digitally-savvy employee is assigned to mentor an executive. The problem is that employees likely doesn’t understand the context of leadership for that executive and focuses on “what” and “how” without the “why”. I have found it infinitely easier to teach an executive how to think and be digital than to teach a digital native how to be a leader.
4. Expose leaders to digital customers. At one company I’ve worked with, executives take every Thursday afternoon to go out and meet with customers. In the past few years, they’ve added digital channels to the mix, ensuring that executives see how customers use their mobile devices to engage with the company — and their competitors. There’s nothing like experiencing first hand the digital trials and tribulations as customers try to engage digitally with your organization.
5. Engineer engagement. One of the hardest areas to change is the personal engagement of an executive on digital channels, either internally with employees or externally with customers and partners. In my book, “The Engaged Leader”, I lay out three ways to engage — Listen, Share, and Engage. Find ways to jumpstart direct, personal engagement by executives — the conversation and relationships they develop, if tied to strategic objectives, will sustain their digital engagement.

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