Digital Transformation (DT) has been a buzzword for quite a few years. While the term itself has remained consistent in its use, the underlying technology context has evolved significantly over the past decades. Digital Transformation (DT) as a movement has transitioned through different technology phases beginning with computer-driven automation and web enablement before moving to cloud and mobile enablement. IoT, and AI/ML represent the latest transition phase the industry is going through. While technology continues to be the mainstay of any DT program, enterprise leaders have begun realizing two things: that merely adopting the latest shiny technology trend does not provide all the answers to their challenges and rather importantly, focus on critical strategic areas such as customer experience, operational efficiency, and cultural change impact of DT needs to be considered first. In fact, hyper-focusing on the technology deployment in a silo often results in the failure of DT programs, a theme all too common. To navigate these challenges effectively, it is essential for leaders to understand and take into consideration the common pitfalls associated with large DT initiatives.

DT initiatives often, just, upgrading IT infrastructure, automating processes, and adopting new digital tools. However, these efforts can become fragmented if not strategically aligned with the organization’s ultimate goals. Challenges are further exacerbated when enterprises try to handle too many initiatives at once without a clear roadmap or priorities. This scattered focus can lead to significant pitfalls, such as resource misallocation, lack of cohesive vision, and failure to achieve meaningful impact (to the customer primarily!). After all, an organization and its functions, processes, and strategies exist to serve the customer. Recognizing the centrality of the customer can help streamline these efforts and improve overall outcomes.

In a recent survey of over 100 organizations with more than $50 million in revenue, McKinsey reported that "63 percent of respondents characterize the implementation of generative AI as a 'high' or 'very high' priority. Yet 91 percent of these respondents don’t feel 'very prepared' to do so in a responsible manner." This highlights a significant inference: organizations are eager to embrace new technologies but lack the necessary preparation and strategic alignment to implement them effectively.

The COVID-19 pandemic further accelerated the need for digital transformation, as enterprises realized they needed to fast-track their DT initiatives to stay afloat. As Forbes noted in its 2023 article, "While the collective experience has been a testament to business resilience, these digital transformations have also created process roadblocks and siloed communications that are impacting the organization’s ability to deliver value to the customer." This underscores the point that a technology-focused approach alone is insufficient. When digital transformations are implemented rapidly without a holistic strategy, they can lead to fragmented processes and poor internal communication. As a result, organizations struggle to deliver cohesive and effective customer experiences, highlighting the need for a more integrated approach that aligns technology with overall business goals and customer needs. To truly harness the power of DT, organizations must shift their focus from technology alone to a more balanced and strategic implementation.

The latest move towards AI adoption exemplifies these challenges. Despite its rapidly evolving potential, leaders hesitate to adopt AI fully because the processes and exact business implications are not yet fully understood. Clearly, technology alone cannot define the value of a DT program for an enterprise and its customers. Yet, leaders often hyperfocus on the "WHAT" aspect of DT and lose sight of the equally critical "WHY" element. A more strategic, customer-centric approach to DT can bridge this gap and drive more meaningful transformations.

This article is Part 1 of a three-part series exploring the importance of customer experience in digital transformation. In this part, we focus on why customer journeys should be central to DT initiatives. Part 2 will delve into the data analytics aspects of customer journeys, illustrating how data can drive DT. Part 3 will discuss how redesigning CX journeys can lead to operational improvements and monetization.

Nikhil Menon

Starting with Customer Experience

So, what do enterprise leaders need to consider when trying to derive value from their DT initiatives, and where should they begin? A good place to start is answering the fundamental question of “Why”. Why is a Digital Transformation needed in the first place? There can be several reasons that could serve as the basis for digital transformation. Forbes, for example, lists six key reasons why enterprises undertake digital transformation programs:

• Keeping up with customer expectations
• Improved efficiency
• Competitive advantage
• Cost savings
• Enhanced security
• Increased agility

Should an enterprise take all these into consideration to define the basis for every digital transformation it undertakes? Probably not. By trying to align with all at once, the program is attempting to address multiple competing priorities that can be at odds with one another. This can increase the risk of program failure and suboptimal outcomes. So should leaders focus on fewer WHYs at a time?

What if instead we could identify and focus on just ONE factor instead? Would that make it easier to define the value of transformation and make the transformation successful? What would that one factor be?

To answer this question, we would do well to go back to a first principles question: "Why do enterprises exist?" An enterprise operates primarily to provide value to its customer (a must) while generating revenue (an outcome) for itself. Its operating structure and internal capabilities (the how and what aspects) are explicitly designed to serve this purpose. One of the most powerful ways to define the basis for any digital program an enterprise undertakes is to find shared purpose and synergy between the digital transformation initiative and the enterprise's primary purpose. In fact, back in 2016, when digital transformation programs execution was at its peak globally, Forbes assessed the risk of failure in digital transformation to be 84%. Leading consultancies such as McKinsey and BCG place this failure rate between 70% to 95%. That is a staggeringly high failure rate. The number one reason for these failures, stated by all of them, is not surprisingly the lack of alignment to business outcomes.

Many executives tend to focus purely on the how and what aspects, losing track of the underpinning why. This can result in suboptimal technology implementation and lower realization of value from the transformation. By focusing on the why, we account for alignment to actual business outcomes. A program that shares synergy with the enterprise's ultimate larger purpose can greatly help define and shape it for success. Keeping customer experience as the primary “why” factor to guide digital transformation ensures that the enterprise realizes optimal value from its digital tech investments while simultaneously using it to grow its revenue over the foreseeable future.

But what of the remaining reasons such as improved efficiency or competitive advantage? Don’t those count? The answer is of course they do—however, if we keep customer experience front and center and design the program effectively to deliver on it, the other factors can be streamlined and directed to serve the primary mandate. This brings us to the critical importance of understanding and prioritizing customer experience journeys in a digital endeavor.

The Case for Customer Experience Journeys as a Primary Basis for DT

Definition and Importance of Customer Experience (CX): Customer experience (CX) is an end-to-end journey rather than just a series of customer interaction points. For example, when a customer calls your service agent with a service question, your company would excel not only by improving the customer’s experience with the call (such as resolving the query quickly) but also by addressing why the customer had to call in the first place and exploring better ways to resolve the query upfront. This illustrates the difference between improving a customer touchpoint and enhancing the entire customer journey.

A Harvard Business Review article states - “A company that manages complete journeys effectively does its best with individual transactions and seeks to understand the broader reasons behind customer interactions. It addresses root causes and creates feedback loops to continuously improve interactions both upstream and downstream from the initial contact”. Therefore, CX is the sum of all touchpoints (real or perceived) and moments that shape the customer's perception of the brand. Ensuring a positive CX is crucial as it directly impacts customer satisfaction, loyalty, and overall business success.

Why CX is a Critical Component for Successful DT: CX is a critical component for successful DT because it aligns the transformation efforts with the primary purpose of the enterprise—to serve its customers. By focusing on improving CX, organizations can create a more customer-centric approach to their operations, which in turn drives business value. This alignment ensures that digital initiatives are not just technologically advanced but also relevant and impactful for the customer.

Benefits of Focusing on CX: There are obvious benefits of focusing on CX, such as improved customer scores, increased retention, and enhanced loyalty. Enhancing CX leads to higher customer satisfaction scores, as customers feel valued and understood. A positive customer experience fosters loyalty, reducing churn rates and increasing customer lifetime value. Satisfied customers are more likely to become repeat buyers and brand advocates, driving word-of-mouth referrals and sustained business growth. Additionally, focusing on CX can lead to better customer insights, allowing for more personalized marketing and product offerings, which further boosts customer engagement and revenue.

What is more interesting is how improving CX can start shaping the whole organization, its associated processes, structure, and people towards a customer-focused organization. It's almost automatic, like a cascading effect. When you address one customer need effectively, it naturally leads to improvements in other areas. By prioritizing customer needs, companies are compelled to streamline processes, enhance employee training, and foster a culture of continuous improvement. This customer-centric approach encourages cross-functional collaboration, breaking down silos and improving communication across departments. As a result, organizations become more agile, efficient, and responsive to market changes. Investing in CX aligned DT initiatives empowers employees by providing them with the tools and information they need to deliver exceptional service, leading to increased job satisfaction and reduced turnover. Ultimately, a strong focus on CX aligns the entire organization towards a common goal, creating a more cohesive and effective business operation.

Starting DT with Customer Experience Journeys

So how exactly can enterprises go about setting up customer experience as the primary factor to guide and align their digital transformation journey? Enterprises and leaders should weave customer experience into the foundation of any digital transformation program. Here’s how they can achieve this:

1. State the Vision and Mission for the Digital Transformation clearly keeping Customer Experience at the top

As a first step, every critical digital transformation program needs to align its charter and mission with the enterprise's overall goal, ensuring it focuses on customer experience. This can be done by citing clear customer experience business goals and KPIs that the program needs to enable. For example:

• Enhancing Customer Satisfaction: Achieving a customer satisfaction score of 90% within the next 18 months by improving service delivery and support.
• Boosting Customer Retention: Increasing customer retention rates by 20% over the next two years by enhancing the onboarding process and personalized engagement.
• Improving Net Promoter Score (NPS): Raising the NPS by 15 points within a year through improved response times and proactive customer support.
• Driving Revenue Growth Through Customer Engagement: Increasing revenue from existing customers by 25% over the next 24 months through targeted upselling and cross-selling initiatives.

It might be worthwhile to mention that organizations should also consider setting more granular and tactical goals as part of the DT program. Goals such as the following (illustrative) could be equally important and prudent to include:

• Reducing Customer Churn: Reducing customer churn by 15% over the next 24 months.
• Improving Installation Process: Reducing the dissatisfaction rate with the new installation process by 50%.
• Retaining Moving Customers: Reducing churn by 40% among customers moving houses.
• Reducing Cancellations: Reducing cancellations by one-third for new customers who canceled before installation or within 90 days.

These forward-looking goals, both strategic and tactical, highlight the business value of transformation. In contrast, a goal like "Modernize CRM system to reduce tech debt" focuses more on system replacement, making the impact on the customer and value realization an afterthought. Technology executives should avoid such pitfalls.

2. Identify Key Journeys that Help Achieve the Stated Vision and Mission

Defining the journeys that matter (from step 1) and deciding where to begin the transformation requires a thorough and balanced approach. This involves performing a holistic analysis of each customer experience journey, ensuring a comprehensive understanding of current operations and identifying areas for enhancement. The analysis should include:

• Describing the Current Processes from Start to Finish.
• Analyzing Current Performance and KPIs of Key Steps.
• Gathering and Analyzing Customer Feedback.
• Employee Insights and Feedback.
• Leveraging Data and Analytics.
• Benchmarking Against Competitors.

By understanding these journeys in detail through a comprehensive and multi-faceted analysis, companies can pinpoint the most critical areas for improvement. This detailed understanding allows organizations to align their digital transformation initiatives with their CX-focused vision, ensuring that every change made contributes to a better overall customer experience.

3. Redesign the End-to-End Process

Redesigning the process should be approached as a roadmap, where a series of tactical wins contribute to a strategic overhaul. This involves:

• Mapping out the desired future state of the process.
• Identifying and implementing quick wins that can show immediate improvements.
• Ensuring that the redesign is aligned with the future-focused and customer-centric goals.

A common pitfall to avoid is the "old wine in a new bottle" scenario, where enterprises retrofit new systems with old processes. Instead, they should design processes for the future while keeping them operationally relevant. Testing the impact of process changes against customer experience goals can significantly reduce the risk of failure.

4. Make Technology Decisions Wisely

Once the vision and business context are aligned, selecting technology becomes more straightforward. Key platforms, tools, and services can be aligned more easily as expectations are well-defined. Here are some steps to consider:

• Evaluate how different technologies can support the redesigned processes.
• Select tools that enhance customer experience and align with business outcomes.
• Ensure that technology choices are driven by the specific needs identified in the customer journey analysis.

For example, if the goal is to reduce customer churn, a CRM system with advanced analytics and customer insight capabilities can help track and predict customer behavior, allowing for timely interventions. Similarly, for improving installation processes, a project management tool integrated with real-time customer feedback can streamline operations and enhance customer satisfaction.

By following these steps, enterprises can ensure that their digital transformation efforts are centered around customer experience, driving both improved customer loyalty and organizational efficiency. This integrated approach aligns technology with overall business goals and customer needs, ensuring a successful digital transformation journey.

Conclusion

In this article, we have articulated a thought process for Digital Transformation that seems like common sense but is often not commonly followed. Customer Experience has a direct implication for an Enterprise’s bottom line – and aligning DT to CX can help Enterprises get clarity on the actual value derivable from its initiatives. However organizations are complex entities, and what appears to be common sense is challenging to implement in real life. Several typical challenges that can impede the success of a digital transformation program, include.

• Human Dynamics and Bureaucratic Processes: These can slow down decision-making and execution, causing delays and inefficiencies.
• Complex or Ambiguous Business Models: These make it difficult to define clear business value and align digital transformation efforts with organizational goals.
• Resistance to Change and Organizational Lethargy: These can derail progress as employees and leaders may be reluctant to adopt new processes and technologies

How the organization addresses each of these challenges plays a critical role in determining whether a Digital Transformation program will succeed or fail. Nonetheless, by adhering to a core philosophy such as improved customer experience, which binds a business together, technology leaders can tap into the latent glue that holds the business itself together and improve probability of success. The CX oriented approach ensures that Digital Transformation programs are not only technologically advanced but also aligned with the fundamental purpose of the organization—serving the customer. Through careful planning, strategic alignment, and a relentless focus on customer experience, enterprises can navigate the complexities of Digital Transformation and emerge more agile, efficient, and customer-centric.

As we transition to Part 2 of this series, we'll delve into the data analytics aspects of customer journeys and how they can drive digital transformation. Stay tuned as we explore how leveraging customer journey data can personalize experiences and optimize interactions, setting the stage for meaningful and impactful transformation.

About the authors

Ashish Aggarwal is a technology leader, published author, and award-winning expert in Digital Transformation and Modernization with nearly 25 years of experience. A Harvard Business School alumnus (GMP program) and current Harvard Extension School ALM Graduate program student, Ashish is recognized for his exceptional leadership, deep technology expertise, and insightful approach to overcoming modern business challenges. As a visionary thought leader, he has driven significant growth, efficiency, and competitive advantage through strategic thinking and technological innovation. His notable accolades, including the Asia One – Most Influential Technology Leader 2023 award, and his engaging presence as a speaker and author, underscore his impact in both academic and industrial landscapes. He can be contacted at asaggarwal@gmp19.hbs.edu, https://www.linkedin.com/in/ashishaggarwal/

Nikhil Menon is a seasoned technology strategist with over 21 years of industry experience across Telco, IT and Strategy Consulting. His passion lies in reimagining how new and emerging technology can deliver consistent and sustainable value for his clients. His expertise spans technology strategy, enterprise architecture and cloud computing, and has led successful delivery of diverse transformation initiatives for several Fortune 100 clients. He currently is part of the CTO office of a leading Indian telco where he is building strategies to actively adopt AI and other emerging technologies as part of its ongoing modernization programs. He can be contacted at nikhilkutty@gmail.com, https://www.linkedin.com/in/nikkmenon/