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A value-driven view of digital transformation

Adam Schanfield, Bryan Frank
Girl walking in forrest with backpack

The concept of “digital transformation” has changed since Claude Shannon published A Mathematical Theory of Communication (Shannon was really focused on digitization), but boardrooms and executive suites have been abuzz with efforts to reimagine the ways that their firms operate in the digital world for at least a few decades.

More recently, the COVID-19 pandemic and its aftermath have served as accelerants to the pace of change. Pandemic aside, relatively recent advancements in digital platforms and data—particularly the advent of the cloud and the massive volume of data collection analysis it enables—have laid bare the cost of not changing, and the opportunities that laggards may miss to unleash new solutions, experiences, and business models.

So why are so many firms stalled in their digital journey, and why have so many failed along the way? Our work with clients over the past two decades has revealed that an over-emphasis on technology—at the expense of people and process—is the stumbling block to success.

We have developed a human-centered approach to digital transformation, melding the latest and most flexible technologies with ways of working that empower employees and reduce complexity. At the core of our methodology is Service Design: it’s our way of simplifying the complex orchestration of technology, experience, and operating model (people and processes) to improve how all stakeholders (customers, employees, vendors, investors, etc.) interact and capture value.

Here are the tenets we follow for a successful digital transformation:

A journey, not a destination: Adopting agile rules of the road

Whether firms want to develop new products and services, change how they serve customers, or simply improve how their business operates, there is no final destination, no completion date for a digital transformation.

In a successful digital transformation, an organization aligns on a North Star to guide the journey, and develops plans that change frequently based on new information, insights, and opportunities. This is the core of an agile governance model: empowering working teams to continually adjust their course in pursuit of agreed-upon objectives, enabling collaboration across functions and teams, and reducing waste. In our experience, those firms that widely accept this governance model ultimately discover it to be liberating: as they shift their approach and frame of mind, they become open to discovering and acting on valuable, new information that helps them deftly navigate market shifts.
This is the core of an agile governance model: empowering working teams to continually adjust their course in pursuit of agreed-upon objectives.

Embrace change
Continuous change is core to being agile. Like so many things in life, the benefits for a firm of learning and adapting in a digital environment greatly outweigh the costs of rework.

Digitally-native firms exemplify this power of adaptation as the road twists and turns, despite the momentary pain they may feel: for example, when Google shut down Google+ or Facebook changed its name to Meta, reflecting its investment and focus on the metaverse, these firms viewed such moves as learning opportunities and efforts to continually refine their offerings.

As non-digitally-native firms learn to embrace change, it’s critical that their leaders humbly acknowledge that they do not have all the answers, and that they must stay on their toes as the market changes or obstacles arise.

Embrace a product mindset by empowering people
With customers’ needs constantly changing, it is nearly impossible for any traditional, hierarchical firm to quickly adapt. Successful digital firms try to stay ahead of the curve by pushing decisions down to those teams that are closest to customers, and by assigning ownership of discrete Products to SLAM (self-organizing, lean, autonomous, and multi-disciplinary) teams that are accountable for delivering outcomes. When teams are empowered with the space, permission, capabilities, and incentivization to perform, they can focus on finding new paths of growth, often by testing, learning, and adapting to customers.

When a large OEM manufacturer in the RV space turned to Kin + Carta to develop a new offering, we worked with leadership to carve out space from the larger organization and assemble cross-functional (SLAM) teams that moved quickly on discovery, definition, and development of a prototype.

For a traditional organization like our client, the SLAM team ran counter to their hierarchical and functionally-aligned organization. But when the team was freed of the usual corporate strictures and empowered to build a product that served their users, they delivered an innovative new product that solved a fundamental problem in the industry.

Enable collaboration
Whether your organization is hierarchical or a loose matrix, when stakeholders collaborate, they can deliver results. Our experience with clients is consistent with the rich body of scholarship on work: productive collaboration requires psychological safety in which individuals align on a shared purpose, establish shared incentives, acknowledge the distinct and necessary contributions of each member, and agree to ways of working. Building this foundation for collaboration is no easy task; beyond espousing principles, firms often need to rethink their organizational dynamics and processes to ensure success.

In our work on the eCommerce platform for a large distributor, Kin + Carta conducted a detailed discovery process that included deep-dive interviews with stakeholders throughout the business. That discovery revealed a potential misalignment and channel conflict between the professional Sales team and the e-commerce team.

To facilitate alignment and collaboration, we deliberately involved the Sales team in development of the product and embarked on an education campaign that brought product demos to a broad audience, so that we could develop legions of advocates and evangelists for the new eCommerce platform. The launch of the product was a success and teams throughout the organization continue to contribute to the evolution of the product.

Eliminate waste
While most clients hire K+C first to create a new product or experience, that initial engagement often leads to a more thorough digital transformation. Here’s why: it’s easy to become excited about new, client-facing products and experiences that may actually complicate a firm’s offerings—while ignoring some of the most painful backstage processes.

To ensure success of any new offering, we aim to anticipate potential bottlenecks and proactively seek ways to automate manual and time-intensive processes that create waste. In fact, when clients prioritize the least exciting elements of a digital transformation, such as internal employee tools, etc., they often accelerate the speed of adoption.

Set your scorecard: align on the “sweet spot”

The most successful digital transformations happen at the sweet spot where human (user) desirability, business viability, operational executability, and technical feasibility meet. From the outset of any engagement, we invest time and effort to identify the most critical opportunities for clients, and evaluate which of those opportunities will hit the “sweet spot.” And we continue to evaluate the degree to which the chosen opportunities fulfill each of these dimensions over time.

During the COVID-19 pandemic, we worked with leading pharmacy and grocery chains to rapidly develop a digital front-end to the COVID testing and vaccination experience. While the concept for a chatbot to handle the influx of requests for vaccine appointments seemed obvious, it was a complex process flow. Uniting systems for medical records, vaccine supply, and appointment availability in one seamless chatbot experience for desktop and mobile wasn’t easy, but we worked assiduously to ensure that we hit the sweet spot.

From patient intake to validation and scheduling, we sought ways to make it easy for users (who loved that they could use the chatbot at any time), viable for the business (a low-cost, easy-to-deploy product), a relief to operations, and technically scalable and secure.

Define your digital operating model

Changes to digital and data products nearly always impact people and processes. To ensure that firms enable their organizations to be successful, we recommend starting work on the “backstage” operating model at the same time as the “front stage” experience, and developing a data strategy that treats data as a product.

Match your backstage to your front-stage
When Starbucks first launched mobile ordering in the Starbucks app, it was a revolutionary change to the customer experience that established a powerful competitive advantage. While ordering in the app dramatically simplified ordering and pickup for customers, it complicated how employees received, routed, and fulfilled orders.

How would individual locations control the velocity of orders, deal with stockouts, and store/distribute orders awaiting pickup? With so many changes to in-store operations, the success of mobile ordering is as dependent on backstage people and processes as it is on the customer-facing technology.

Indeed, the interplay between backstage operations and the frontstage product is so critical that Starbucks had to develop the operating model in concert with the development of the app. This is why we counsel clients to develop the backstage operating model and any new digital or data products simultaneously; by doing so, firms have the highest chance of success for those new products.
Graph depicting Front stage (Customer's behind the scenes) and Back stage (Organization's behind the scenes)

Manage data as a product
Data has been the subject of many hyperbolic headlines for years; a casual Google search suggests three distinct eras in the last 10+ years:

Era 1: Big data entered the national conversation in 2011.
Era 2: Machine Learning gained popularity in 2015 and 2016.
Era 3: Data mesh entered the discussion in 2021

Still, many digital laggards have not benefited from the larger data conversation, and data remains the largest unused asset in the organization. Managing data intentionally and strategically (e.g., as a product) allows organizations to unleash top and bottom line growth via new insights and customer offerings.

We worked with a publicly-traded agricultural company that had a hypothesis that they were leaving value on the table when it came to the data their business collects. Kin + Carta helped this client envision how their data could be monetized, and defined the audience and value proposition this data would provide.

It became clear through our audience research that this data was worth thousands of dollars annually to any one customer. Armed with research and a financial model justifying our client’s investment in product-izing its data, we set our client on a path to taking its underutilized data and generating a net new revenue stream.

What’s next?

Any transformation can be daunting. Kin + Carta aims to make the digital transformation journey as engaging, rewarding, and humane as possible. To learn more about our work or the case studies we shared here, contact our Strategy & Innovation leadership team.

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