Accelerating Digital Transformation to Drive Uncommon Growth
With the backdrop of the COVID-19 crisis, there is more pressure for digital transformation to perform than ever. Altimeter, a Prophet company surveyed more than 600 key executives about how they are pursuing digital transformation and the impact of the pandemic (see our global report “The 2020 State of Digital Transformation”), including 100 in Southeast Asia (SEA) across Singapore, Indonesia and Vietnam. The study reveals interesting differences between digital transformation effort and sentiment in SEA and the rest of the world.
While the rest of the world is becoming more risk-averse, SEA expresses optimism about the future outlook – in fact, a significantly higher number of companies have accelerated their digital transformation initiatives and are focused on growth.
There are five key takeaways regarding digital transformation in Southeast Asia:
Top drivers of digital transformation in SEA is more growth-oriented, focusing on improving efficiency to go after new markets and customers while adopting more agile and flexible operation.
SEA experiences less financial impact due to COVID-19 than the rest of the world, and they have accelerated investments in digital transformation, especially in marketing operations.
Budget cuts are less of a digital transformation challenge to SEA than rigid infrastructure, data quality, ROI articulation as well as digital literacy and expertise within the organization.
The focus of digital transformation investments in SEA leans towards connectivity, social and consumer platforms followed by AI & Analytics.
There is stronger leadership, culture and optimism of digital transformation in SEA thanks to the consistent and visible efforts driven by top executive in C-Suites, especially CEO & Board of Directors, and CDO
What are the opportunities and challenges for companies to accelerate digital transformation in Southeast Asia? Download the full report to learn more.
Connect with us to learn how Prophet can help you drive uncommon growth in Southeast Asia.
Digital Transformation in China: Opportunities for Growth
Our research shows that while CEOs are great transformation leaders, they are less skillful communicators.
At the end of 2020, global companies know that digital transformation is a critical piece of moving their businesses forward. 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 agendas.
“It is now imperative for companies in China to seize these opportunities and accelerate their digital transformation agendas.”
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. (Download the full China report here)
The State of Digital Transformation in China: Understanding the Driving Force
Digital transformation is a firm-wide agenda that requires a clear vision and commitment communicated from the top.
In China, digital transformation initiatives are mostly sponsored by the CEO, CMO and CIO/CTO. Together, these roles provide sponsorship for digital transformation in 83 percent of the Chinese companies. That differs from other regions, where a broader mix of leadership is typically in charge, including the Chief Digital or Chief Innovation Officer, as well as the Board of Directors.
Figure 1: Executive Sponsorship of Digital Transformation
“Which executive officially owns or sponsors the digital transformation initiative?”
Most notably, significantly more CEOs and CMOs in China are ultimately responsible for digital transformation, at 37 percent and 13 percent respectively, compared to 24 percent and 2 percent in the rest of the world.
But there’s a problem. While CEOs lead the charge and appreciate the strategic importance of digital transformation, they often fail to communicate those transformation initiatives are considered a top priority. And they don’t provide enough visible follow-through and strategic guidance.
Figure 2: How Digital Transformation is Driven by Leadership
“Which of these statements best describes the nature of executive leadership in your organization?”
Because they fail to articulate the vision adequately and don’t actively promote it, mixed signals can lead to confusion for employees and customers. Just 46 percent of the respondents in China say their executive leadership has made digital transformation a top-three priority, compared to 61 percent in the rest of the world. And 22 percent say their executive leadership doesn’t see digital transformation as a focus.
Top drivers of transformation in China: Building a more resilient and high-performance culture and operation.
The events of 2020 have changed the way the world looks at digital transformation. Instead of focusing on external drivers, such as finding new markets and customers, they are more driven by internal needs to focus on their operations.
Figure 3: The Top Drivers of Digital Transformation
“What are the key drivers of digital transformation within your organization? Select up to three.”
Chinese companies say that developing a better culture, with more collaboration and innovation, is now the leading digital transformation driver. It was named by 30 percent of Chinese executives, compared to 22 percent in the rest of the world. That is closely followed by increasing productivity (29%) and working in a more agile, flexible way (28%).
Companies here are also more sharply focused on building resilience to keep up with change and global disruption. Some 21 percent of Chinese executives say they are looking for an increased ability to comply with new regulatory standards, compared to 14 percent of the rest of the world. And 20 percent hope to become more resilient to disruption, versus 16 percent. Notably, more believe they can actively create a culture capable of handling that disruption, at 20 percent, versus 12 percent in other regions.
Advance the Transformation: Opportunities for Building Strength
We observed some distinct characteristics of how companies approach digital transformation and identified three opportunity areas they should focus on to move faster toward transformation goals:
Lean into the future by pursuing multiple technologies
Figure 4: Prioritized Technology Investments
“What are your top priorities for technology investments in 2020? Select up to five.”
Around the world, companies are heavily investing in the same five technologies: Cybersecurity, Cloud, Machine Learning and Artificial Intelligence, 5G and Internet of Things.
Although Chinese companies are investing in these technologies too, they are also more diversified, putting their eggs in far more baskets.
Continuing to invest in emerging technology – and hiring the talent that can best help leverage it – will build competitive advantages and enhance agility, enabling companies to move quickly into new directions.
Integrate more, collaborate better
Chinese companies are also behind other regions in their ability to get employees to collaborate.
Figure 5: Employee Collaboration and Engagement
“Which of these statements best describes how your organization is transforming employee collaboration and engagement?”
In China, just 24 percent of the respondents say their employees are connected throughout the organization, versus 32 percent in the rest of the world. And 38 percent of Chinese companies say that while workers frequently use employee platforms, digital engagement is still limited when working beyond the project team, compared to 27 percent of the rest of the world.
Figure 6: Success Metrics Across Functions
“How do you currently measure success across marketing, sales and service teams?”
Moreover, less than half (44%) of Chinese executives say their companies have aligned customer and revenue KPIs across marketing, sales and service teams. Yet 67 percent of those in the rest of the world have achieved this. As the report emphasizes, unifying metrics is an essential requirement for digital maturity.
Our experience substantiates that. While Chinese companies seem especially skillful at building and deploying highly effective project teams, they need broader collaboration across different functions to achieve maximum impact.
Double down on data
Chinese companies trail other regions in leveraging data as a core strategic component.
Figure 7: The Use of Data
“To what extent do you have clean and accessible data, clear processes, and organizational support for and discipline around data science in your organization?”
Only 38 percent say their company has succeeded in making data analytics a central capability, compared to more than half (51%) for the rest of the world. That means 62 percent still have the opportunity to expand and build their data capabilities.
Beyond digitizing marketing and sales, digital maturity is also about strengthening organizational operations and driving innovation to increase revenue. That requires a new kind of leadership. CEOs and other leaders must become cheerleaders for digital progress.
Digital leaders can’t afford to lose sight of the need to invest in digital transformation, even when budgets tighten. While no one can predict future moments of opportunity, they will continue to come, creating digital leaders’ chances to further outperform digital laggards.
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.
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.
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
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.
Customer-Centricity: Closing the Gap Between Digital and Human
As bots get better, brands are challenging their assumptions about effective machine communication.
The past few months have made it more apparent than ever that shifting to more virtual offerings and seamless interfaces are now the main way for businesses to survive and thrive in our online post-COVID world. These changes – accelerated but not triggered by the pandemic – have fundamentally validated one of Prophet’s core convictions: customer-centricity shouldn’t be determined by what companies think is technically feasible. It has to start with us human beings, putting the real needs of people at the center of every decision. It is clearly digitally driven, but at the core, customer-centricity is always a deeply human endeavor.
For too many companies for too long, the strategy has followed what is technically feasible instead of the other way around. But for the few that have been focused on a people-first approach, having their strategy informed from what humans need first before shifting to what is possible on the back end, the success is apparent.
“It is clearly digitally driven, but at the core, customer-centricity is always a deeply human endeavor.”
Companies like Amazon or Netflix – two highly relevant brands and businesses everyone would agree – are heralded as paragons of the digital age but these brands have become the powerhouses they are because they are human-focused. While there are billions of dollars of tech investments behind each, their unwavering focus on their customer and delivering an experience for them that is fast, simple and incredibly gratifying drives what they do and their bottom line.
Of course, for companies in manufacturing, life sciences or financial services, reinventing themselves as digital entities is more complicated than for say a company with a digitally native business model and their failures often show a similar pattern – namely that their strategies demonstrate a lack of clear thinking from the customer’s standpoint. They’re preoccupied with their products, their sales and their success. But now it’s time to look at everything through the lens of the customer, this is where it should start. Success starts with knowing the buyer. What is then required is a holistic view of the digital landscape with technical feasibilities assessed early on. That is how you bridge the often missed gap between a customer-centric digital strategy and a human-focused one.
Faux humans: The rise of bots
The reason we have opened our doors in such large numbers to tools like Siri and Alexa comes down to convenience, ease of use and the fact you speak to them as you would a human. They are customizable, often adapt to your preferences and deliver an experience you can consistently count on. And companies are eager to take advantage.
One of our favorite examples of the successful use of artificial-intelligence-driven empathy comes from the global insurance company, AXA. To help it successfully grow its business in Asia, AXA had the desire to develop a new digital customer engagement proposition, one that humanized the experience and provided a consistent customer journey and brand experience across the region. Emma was born – AXA’s first humanized user interface, which has become the core of the brand’s new digital customer experience, handling everything from claims to servicing, health content to symptom checks and helping individuals find the solutions and content most relevant to their needs. She’s not just efficient and accurate. She’s a friendly embodiment of a brand committed to assisting people as they strive for financial wellness, whilst successfully bridging the gap between digital engagement and financial advisor partners.
And recognizing the massive gap in helping people deal with the mental-health challenges posed by the pandemic, AXA expanded Emma’s skills to deftly field calls about mental-health questions. That’s a high-risk undertaking, but initial tests show customers don’t just appreciate the effort, they’re using the service extensively.
Challenge definitions: What does it mean to be human?
It’s easy to make assumptions, and companies often mistakenly believe they know everything there is to know about their customers. That’s seldom true, especially in a period of such massive upheaval. It’s critical that companies take this time to go deep as they gather insights, with an entirely rededicated sense of empathy and rigorous analytics. For us, that typically means finding out which drivers are the most essential, right now, for customers and prospects. What makes one brand relevant to them and another forgettable? Are they looking for inspiration or efficiency? Do they feel the brand is available to them when and where they need it? Do they sense it meshes with their own values?
With each new wave of technological development, the digital age shifts shapes and speeds up. And it’s vital that leaders focus on the potential of emerging technology. It’s critical that companies do not let themselves fall behind in efforts to continue to be as connected, nimble and data-driven as can be. They need to continually ask: What tools do we have? How digital is our go-to-market approach? How automated is our production?
But too often, we have seen companies spend tens of millions – and sometimes hundreds of millions – in tech investments before understanding how these initiatives might help customers and eventually drive growth. The critical decisions must always balance both: What do your customers need most right now and what is your company capable of providing?
Digital investments, like any other use of capital, should only be made when companies are clear on how they will serve the largest purpose. Addressing just the digital possibilities in a siloed view is a surefire way for a business to fall short in today’s reality. It is the combination of instilling a human-focused process with digital capabilities and prowess that sets up a business for customer-centric success.
If you’d like to learn more about how a customer-centric strategy can improve the growth of your business then reach out today.
For most business leaders, this is a pivotal time. The decisions being made are dictating whether you survive or thrive in these uncertain times and there is enormous pressure on leaders to step up and provide the structure, guidance and clear communication that people are looking for.
This playbook brings together some of the latest thinking from our experts to help with those decisions, from how to double down on your company culture and equip your teams for the future way of working, to understanding the new needs of your customer and making the digital go-to-market shift. It provides some actionable ideas to get your business back on track now as we move out of this crisis and for the growth opportunities beyond.
The reason transformation is hard – whether digital transformation or some other kind – is that companies inevitably run into significant cultural barriers where old mindsets, behaviors and a lack of skill eventually bring things to a halt. Hence, the famous adage attributed to Peter Drucker: “culture eats strategy for breakfast.”
So how can today’s organizations address the complex and amorphous barriers to the transformation that we call “culture” while keeping their breakfast? The answer is to establish an effective Transformation Management Office (TMO).
The Missing Piece of Your Transformation Puzzle
At Prophet, we believe the core failure of most approaches to transformation is that they are not holistic enough to ensure either speed or success. We developed our Human-Centered Transformation Model™ to help see the range of efforts and the necessary interconnections across the DNA, Body, Mind and Soul of the organization. For instance, failed transformations frequently overemphasize technological changes (Body) without buy-in from business stakeholders around how new technologies will enable the strategy (DNA). Or they focus on training up new skills (Mind), without considering the mindsets and cultural behaviors (Soul) that match will with skill, ensuring new capabilities are actually applied in the real world.
Even with a holistic approach, aligning new behaviors, new skills, and new processes also require new ways of making decisions. And this is – to put it plainly – extremely hard without a team devoted to addressing that challenge head-on. We believe a team must actively manage and align those efforts, otherwise, there will be no change and no true transformation. And in our experience, this team cannot live within the rules of the existing organizational structure.
Where Does That Piece Fit Best?
We believe there are two models for this kind of structure for transformation management – federated or centralized. Many companies have (by default) adopted a form of federated management, which assumes that individual business units or functions can be accountable for managing their own transformation as a subset of the whole (see Figure 1). The challenge with this assumption and the federated approach is that you end up with lots of disconnected local work. Most frequently, these local efforts set themselves achievable goals with lengthy timelines and result in very little transformation. Occasionally, companies also set up Program Management Offices, to coordinate communications and track progress. But adding a PMO frequently adds centralized bureaucracy that is divorced from business value – you might get more done, but with less business impact (see Figure 2). The challenge is that these companies are working backward: the federated model is a destination, but it’s not at all the place where you need to start.
Figure 1: Centralized vs. Federated Approaches to Transformation Management
Figure 2: PMO vs. TMO
Prophet’s experience managing transformations of all stripes leads us to believe that you must start with a centralized model. And our research over the last two years has validated that those companies who set up a TMO with a clear roadmap and rituals around decision-making can overcome cultural roadblocks as they emerge. In fact, in our estimation, too few respondents in our recent Catalysts in Action research have stood up a TMO yet. However, 100 percent of those who have reported that it has had a positive impact on their transformation. And a whopping 83 percent reported its impact as “very positive.”
The DNA, Body, Mind and Soul of an Ideal TMO
To be successful, a TMO needs to address cultural challenges holistically across the DNA, Body, Mind and Soul of the organization. A critical first step is strong DNA:
A clear vision about how the DNA of the organization is changing. Who do you want or need to become?
A specific timeframe for achieving that ambition. When do we want to achieve our goals?
Real metrics to serve as signposts. How will we know we’re making appropriate progress?
A TMO must also have a strong Body – an operating model for its core processes and functions that covers five key domains:
Goals & Investments – Defining the transformation, setting goals, and overseeing ongoing investments.
Portfolio & Governance – Overseeing work intake, classification, prioritization and resourcing.
Education & Mobilization – Supporting in-flight projects by enabling teams to improve how they deliver on their goals and assisting with roadblocks.
Reporting & Forecasting – Reporting and actively providing visibility and accountability for the value being delivered.
Change Management & Communications – Providing an organization-wide point of view and air traffic control for change impacts across portfolios.
An operating model for the TMO outlines clear processes for each of these five areas, as well as interaction models defining how key stakeholder groups work together. Done well, TMO processes are not an added layer of bureaucracy; they help streamline effort across a wide range of leaders, teams, and individuals, giving them the clarity they need to take unambiguous action each and every day.
As part of standing up a new TMO for a major US insurer, our team worked together with key leaders to develop a “TMO Handbook.” The Handbook codified specifically how and where the new TMO would integrate with existing business planning processes, but also helped leaders across the business understand how and where to plug in and contribute to decisions about the company’s transformation.
The skills and competencies – the Mind – of a great TMO core team include strong EQ and communication skills to provide visual, verbal and written demonstrations of empathy to stakeholders struggling with rapid change; strong process facilitation skills to apply an Appreciative Inquiry-driven approach to collective problem solving; and strong analytical skills to be able to manage and measure progress. In building its TMO, a US financial institution was intentional about selecting resources with strong EQ and communication skills to staff it, given the level of executive interaction the small TMO team would need to support its charter.
Finally, in their Soul the TMO team must adopt a product ownership mindset, viewing the enterprise as a whole, demonstrating the behaviors and rituals common with the best product managers, including creativity, design, an agile methodology, and data-driven decision making. In this context, their product is the organization. As one of the first steps in managing its transformation, a leading quick-serve restaurant-trained key leaders of transformational initiatives in Agile ways of working, defining the responsibilities, decision-making and behaviors for portfolio and project leadership roles.
The TMO Lifecycle
Ultimately, a TMO is not something that should last forever. Like the transformations they empower, TMOs have a natural end date. The TMO team should know they have a role to play for a period of time, but that all the new capabilities they create should ultimately migrate into other parts of the business. Over the course of its lifecycle, a TMO should eventually move from a centralized to a federated model so that business leaders can go back to managing their individual parts of the business with a shared enterprise mindset and a new set of global and local capabilities. And as with many things in transformation, “timing is everything.”
Thinking about your own organization, consider where it stands in its own transformation journey – are you just getting started? Have you already made good progress? Or perhaps you’re well down the path to a transformed organization? If your organization is one of the 45 percent of companies who have already established a TMO, try to identify where it might be more effective across its DNA, Mind, Body and Soul. If not, consider where a TMO might be able to help accelerate progress with a more centralized approach.
If you’d like to establish an effective Transformation Management Office to propel your company forward at a new speed and instill a new culture of delivery then contact our expert team today.
The Four Pathways to Cultural Change and Business Transformation in China
Our research illuminates the change mechanisms with the most impact, both within China and beyond.
As organizations build resilience amid world-altering shifts, transformation is increasingly relevant. Yet change is challenging, and leaders are often unsure where to start–or where to go next.
For transformations to succeed, the importance of an organization’s culture is beyond question. That said, cultural transformation is often the most significant challenge to take on. Prophet’s 2020 global research based on nearly 500 global transformation leaders, “Catalysts in Action: Applying the Cultural Levers of Transformation,” identifies four pathways of cultural change intended to help companies focus.
“For transformations to succeed, the importance of an organization’s culture is beyond question.”
In this article, we discuss some of the main differences we see between companies in China and the rest of the world, with observations that can help spark uncommon growth.
In many ways, businesses in China approach transformation differently. Compared to other regions, they are more willing to embrace change, and this by a high margin. The Alibaba Group epitomizes this attitude, making “Change is the only constant” one of its core values.
Q: Which of the following best characterize the most recent significant transformation project that you have been involved with in the last two years?
More companies in China are embarking on cultural transformation to keep up with changes internally and to maintain a competitive edge externally. Ping An has started an enterprise-wide digital transformation over the last few years by embracing a culture of innovation and by encouraging to fail often and fast. ByteDance has implemented a bottom-up approach to objectives and results that encourages more transparency and an entrepreneurial spirit. Haier has made employee management and culture central to Haier’s strategy, with hundreds of internal micro companies yielding far better and faster innovations and deeper understanding of local consumers needs around the world. So, we want to understand how business leaders can accelerate growth through cultural transformation.
Proven pathways of change indicate where to start–or where to go next–in transformation. Prophet’s research identifies four pathways of cultural change: Defining, Directing, Enabling and Motivating. All paths are relevant at varying points in time. But it is important to determine which is most relevant to your company right now.
1. Defining the transformation: Don’t overlook middle management.
Consider this the “control tower” for all other pathways. It is where the company solidifies its business and brand strategy, purpose and values. The C-suite is seen as most critical to–and most responsible for–driving the transformation. But this cannot be at the expense of empowering managers, who must serve as key change agents.
This is a regional weakness in China, with only 17 percent of business-unit leaders and middle management given adequate responsibility. While companies in China are more willing to communicate the change widely across the entire organization (46 percent of Chinese companies actively engage most employees, versus 19 percent in rest of the world), decision-making is still led by C-level leaders. And managers are less empowered to drive change.
Q: What level of leadership is most responsible for driving transformation in your organization?
One of the few companies in China that realizes the importance of driving transformation from the bottom up is footwear manufacturer Belle International. A key component of its success has been decentralizing data and using digital as a tool to empower retail managers, giving them more freedom to lead their teams. “I’ve always believed that the vitality of the end market comes from the energy of each store manager and staff,” says Liang Li, executive director, in an interview with Harvard Business Review.
How to accelerate transformation: Find ways to involve BU leaders and middle managers more, creating meaningful roles. They are the connective tissue between the overarching transformation objectives, the marketplace and the day-to-day work of employees.
2. Directing the Transformation: Empowered TMOs yield impact.
This pathway requires taking a holistic view of all the governance, processes, roles, systems and tools needed to enable an operating model that makes transformation real. One way companies do this is by creating transformation management offices (TMOs). Those that have done this have a clear advantage. And those that have given these TMOs the most oversight and influence over decisions are the most successful.
This is an area where companies in China are leading in the way, both in setting up these TMOs and in giving them more oversight. With clear results: 76 percent of companies in China that have established empowered TMOs, are reporting very positive impact.
Q: Which of these best describe the impact that your organization’s transformation management office (TMO) has had?
How to accelerate transformation: A first step toward changing this is establishing a TMO. And if one already exists, make sure its scope is more than just project management. TMOs should be allowed to shape strategy, break down functional silos and coordinate vital initiatives on the transformation roadmap.
3. Enabling the Transformation: Build the capabilities and leadership needed.
This pathway is where organizations identify, source and build capabilities required for employees to thrive. And it is essential if organizations want to succeed in the Digital Age. The current talent landscape demands a compelling employee value proposition (EVP), but this is no longer enough. Companies must take a strategic approach, reimagining where and how they will find the talent needed to power their ambitions.
Although 90 percent of companies in China say that they have aligned talent systems in service of the transformation, there are still some gaps. While China does well-developing employees’ technical skills, it lags when it comes to nurturing the leadership expertise required for transformation. Globally, this leadership upskilling is prioritized by 48 percent of companies and just 35 percent of those in China.
Q: What training topics have been of the greatest need to enable your organization’s transformation?
How to accelerate transformation: Continually assess enhanced capabilities and develop ways to both re-skill existing talent across seniority levels, as well as source new hires through a more strategic approach to workforce planning.
4. Motivating the Transformation: The only failure is failure to learn.
To bring organizational change to life, leaders must behave differently. They must embody the transformation, creating trust among employees as they adopt new ways of working. Stories, rituals and symbols help build belief among employees and connect their day-to-day work to the organization’s new direction. Most organizations rightly celebrate success stories, while failures are less likely to be shared and understood. Focus on levers that create safe spaces and mechanisms for employees to talk about what is working and what isn’t.
This is yet another area where companies in China excel. Despite a directive leadership style, China has embraced a “fail fast and learn” approach that promotes experimentation, with 58 percent of Chinese leaders saying their corporate culture tolerates failure, compared to just 32 percent in the rest of the world.
Q: Which of the following best characterizes the way your organization responds to failure during your recent transformation?
And leaders in China are far more likely, at 79 percent, to encourage experimentation in executing alternative initiatives relative to plan compared to the rest of the world, at 44 percent.
“Risk-taking is strongly encouraged, and failure isn’t stigmatized,” says Jessica Tan, deputy CEO of Ping An in an interview with McKinsey. “What I’ve found is that with each new success, you become more confident in your abilities and your instincts to try the next big thing.”
How to accelerate transformation: Bring teams and divisions together by encouraging the “fail fast and learn” mindset to develop a systematic approach to test-and-learn thinking. The more employees can see these efforts, the better they will understand the transformation process.
Many businesses in China have already made a good start on cultural transformation and recognize its importance in driving growth. Companies in China should continue to pursue those initiatives while shoring up their efforts to teach invaluable leadership skills. But they can’t neglect to take a holistic view to make sure they are setting all aspects of the enterprise up for future success. That means making sure they know how to….
Define transformation: Set a powerful ambition and align with leadership, at all levels, on their role in achieving it
Direct transformation: Establish and empower transformation management offices to optimize operating models
Enable transformation: Match talent strategy to transformation goals, and elevate employees through future-state capability planning
Motivate transformation: Develop culture programs and training to reinforce employee behaviors
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References:
Ngai, Joe. Building a tech-enabled ecosystem: An interview with Ping An’s Jessica Tan. McKinsey Quarterly, December 2018
Yuhao, Liu. 别跟字节跳动讲管理 [Don’t Talk Management with ByteDance]. https://www.huxiu.com/article/344321.html. March 13, 2020
Zhen, Wang. 海尔裂变：2000亿公司创业的样本 [Haier’s Fission: A Case Study of How a 200 Billion Company Creates Startups]. https://www.yicai.com/news/5284427.html. May 14, 2017
百丽国际：让数字化赋能离客户最近的人 [Belle International: Let Digital Empower Those Who Are Closest to the Customers]. Harvard Business Review, January 25, 2019
