Three steps to a digital company

Autor

Dr. János Heé

How traditionally run organisations can reap the benefits of data-driven governance.

31. May 2022

Step 1: Looking inwards

Digitalisation has long since found its way into our private everyday lives. We use Trustpilot to compare whether an e-shop is trustworthy, we buy via smartphone and we know how social media providers like Facebook analyse our data and offer it to others for their benefit. Streaming services or job searches via LinkedIn are a matter of course, and even the best offer for a new health insurance policy is effortlessly fished out of the web of data by most people today. A company cannot escape this new public sphere, international comparability and transparency if it wants to be successful.

However, traditionally managed companies still have a hard time with this, especially when they have been successful without modern data management. Since the Corona pandemic at the latest, even the last traditionally managed company should have realised: only the targeted collection, use and communication of internally and externally generated data ensures long-term survival.

But how can we quickly achieve demonstrable success without incurring too many painful costs? How can digitalisation succeed within existing corporate structures and with the existing workforce? First of all, by looking inwards.

Review company purpose and values

Especially in companies that have always operated successfully, one crucial question is often not asked or no longer asked: Why do we do what we do? It is not about making profits – that is merely a result. Nor is it about producing a specific product or offering a specific service. It is about the inner drive, the underlying motivation and the values associated with it.

What does this have to do with digitalisation? In the digital world, the character of a company is more open, authenticity, open communication, less pronounced hierarchies are in demand. A well-defined inner drive – or as it is called in management jargon – a "purpose" helps.

AirBnB, for example, says about their drive: "We help people to belong anywhere". Here it becomes clear even without further words that the company stands for values such as openness, equality and respect. How else would customers of the accommodation platform feel at home anywhere?

It is worth asking the question "why" before defining new, digital processes ("customer journeys") or strategies, and at the highest level of the company. Many have discovered completely new business areas and opened up customer segments as a result. It is not new that more and more buyers demand not only the best product at the best price, but also ethically impeccable behaviour from the respective company. In return, they remain loyal to these companies and are even willing to pay a premium for their good conscience. Another reason to look at one's own values before tackling digital strategy and implementation.

Tip: watch Simon Sinek's TED Talk on "How great leaders inspire action". It will change the way they look at the core of their business purpose.

Create room for manoeuvre

Changes need capacities, especially financial capacities. Especially where structures and processes have not been scrutinised for a long time, there is potential for cost savings. Instead of accepting that something has "always been done this way", it is worthwhile to review what is already in place. Many internal processes can be simplified and unnecessary redundancies avoided. This is better for the later digitisation step anyway, because a bad process does not become more efficient purely through data, digital transmission. Or in the words of the then managing director of Telefonica, Thorsten Dirks: "When you digitise a shitty process, you have a shitty digital process".

The same applies to the offer: What exactly happened should the least profitable product or the least successful service no longer be offered? Are the contribution margins given for all products or can the company save entire product lines due to customer change? Where can costs be saved in order to invest them in digital measures afterwards?


In their private lives, most employees already file their documents digitally, but in many companies, for example, orders are still printed out several times and stapled in time-consuming folders. Yet there are low-cost or even free digital solutions such as Google Drive or Microsoft Teams. The most important thing here is that individual motivated employees are specifically trained, are responsible for such solutions and become ambassadors of the new way of working together within the company. Short-term active freelancers can provide further important impulses as coaches and quickly convey a knowledge base.

It is amazing how often time and financial freedoms can be created quickly and easily and how positively the new agility of thinking can affect the entire company. Some organisations even take it sportingly and regularly reward the best ideas for increasing efficiency. In a traditional Swiss SME, based on an employee suggestion, an expensive project to build an internal intranet was unceremoniously replaced by a standardised, digital tool. Trello is not meant to be used as an intranet, but after an evaluation, everyone involved realised that the existing project management functions could easily be adapted. In one fell swoop, the staff had an intuitive, device-independent solution that was also free of charge.

Tip: Research the causes of traditional behaviour. Always ask the question "Why do we do it this way and not differently? Conduct workshops to examine the whole company for inefficiencies and cost drivers. Unfortunately, these creep in all too often, which is why these workshops need to take place regularly with broad employee participation.

Strengthen organisation

One of the most important prerequisites for successful digitalisation is a functioning team. Yesterday's hierarchical thinking has just as little place in a modern company as jealously guarding one's own sovereign space. Today, changes must be tackled immediately so that mistakes can be recognised and corrected more quickly. A culture based on "directives", where employees are not allowed to make mistakes, prevents innovation and creativity. Employees who are not allowed to think and act independently cannot develop their own room for manoeuvre, which is essential as a basis for digitalisation.

Tip: Meetings should take place across hierarchical levels, as operational problems or customer complaints can be solved more quickly in the case of process problems. Employees who do not support this cultural change must be dismissed.

A good organisational structure is characterised by functionality and transparency. It maps two things: First, the steps to produce the product or service. Secondly, the steps from the announcement of the product to the delivery to the aftercare of the customers – including the associated digital tools.

It is crucial that all goals of all team members, including those of the top management, are openly communicated and discussed – if only to avoid conflicts of goals, but also so that each employee can be sure of the support of the entire organisation. Setting measurable goals sharpens the view of all team members for the common result and strengthens the feeling of pulling together. A proven concept for this is the OKR approach (John Doerr, Measure What Matters). In a textile company, a key figure cockpit based on the OKR principle was introduced. Every employee can access this cockpit at any time to see the target achievement of all departments in clear graphics. Based on this performance management, the key indicators are discussed every fortnight with all responsible employees. The employees must develop a "feeling" for the figures and describe the situation openly and transparently, without regard to sensitivities, and make suggestions for improvement. An internal coach helps the employees prepare for this performance management meeting and shows them, for example, where they stand in terms of their OKR targets.

Tip: Hold short daily meetings, so-called stand-ins, with the most important employees. Here you can exchange information about milestones and current events and overcome bottlenecks together at short notice. In this way, a sense of community is established on the way to the overall goal. The training of employees plays a central role: speed and flexibility only work if the employees keep up.

Step 2: Markets, customers, partners & products

How they optimise their value chain

In the first step, we talked about the preparations on the way to digitalisation. After reviewing the company's purpose and values, creating room for manoeuvre internally for the new task and bringing the organisation up to date, we are now looking outwards.

Define markets and sharpen customer profile

If a company that has been operating for a long time and is still traditionally managed is to be brought into the digital age, the data available is probably incomplete or non-existent. It may also be that, due to historically grown markets and traditional customer segments, the systematic collection and evaluation of information has seemed less urgent. However, the crisis year 2020 at the latest should have opened every company's eyes to the value of customer data and market knowledge for success.

The past months clearly show that markets can change quickly and drastically. The same applies to customer needs. And both can vary in waves or permanently. Digitalisation helps precisely here: Companies remain flexible.

It is worth finding out whether yesterday's markets and customer segments will also be tomorrow's – demographically, in terms of purchasing power or the way customers will get to know products in the future and where and when they will buy them. There is enough data, studies and forecasts on this that they do not have to generate themselves and can use for their future success. A successful concept for promptly identifying customer preferences or improvements and problems is the Net Promoter Score (NPS) concept. Properly applied, it automates the evaluation of relevant customer touch points with the company and even conducts internal employee surveys with it. Once employees are incentivised via an NPS system, the company becomes more customer-focused.

It may be unfamiliar to companies that have been managed conservatively up to now, but the new reality and the uncertain future require a new way of thinking, the courage to try things out and a corporate culture that is constantly learning, including a certain tolerance for mistakes. Proven markets and customer segments should not be abandoned lightly, but critically scrutinised – especially with regard to their crisis resistance, for example. But beware, building up a market purely digitally is almost as expensive as building it up physically. Performance marketing is a good way to test, but not to position physical products in a new market if you don't know the brand. It is a mistake to think that digitalisation is the magic bullet for rapid sales growth. Digitalisation also requires staying power, patience.

Communication channels are also changing. For many companies, it still seems surprising that they themselves have untapped opportunities – especially in the area of social media. There, potential customers can be targeted precisely and their user behaviour analysed. Influencers are a good way to generate attention. Social media is multifaceted and is not primarily about additional sales, but about strengthening the brand as well as customer support for customer questions. But many companies also have optimisation potential on their own website.

Direct communication to the target groups has the enormous advantage that you can create a world that is oriented towards the needs of the customers. Articles in the popular and trade press have their own advantages, but the one mentioned does not. At the same time, you can influence how well content is found by search engines and thus by potential new customers. We explain exactly how this works in the third part of this series of articles.

Tip: Instead of assuming your existing markets, assume future sales opportunities. Test new markets and new customer segments via search engines and social media with calculated risk. Measure the success. Learn from mistakes. Test again.

Review and involve value creation partners

Which new, possibly digital distribution channels have been developed in the company in recent years? What are the exact benefits of the existing channels? How are intermediaries motivated to open up new customer segments together with the business management? Many companies have inadequate answers to these questions.

Suppliers and trading partners are a natural part of the value chain and a valuable source of data. Ideally, they are also value creation partners who are motivated to be part of the business model beyond sales and margin. Are data fragments of your own customer data already exchanged with those of the intermediaries and end sellers? For example, it would be helpful to give the distributor insight into the changing demand patterns of customers captured through the website.

Shopping baskets in the e-shop open up enormous potential for customer analysis: for example, does a man in Dubai buy his underwear himself or is it done for him by a third party? Is regular merchandise also purchased during a sale via the e-shop? Could it be that a product with a low contribution margin is important because it is easily found via Google and leads to customer demand for products with a high contribution margin (X-selling)? The user behaviour on the website can be used to indicate which of the products presented there but not yet produced are attracting particular interest.

New distribution partners should be analysed and tested, especially those who are already taking advantage of digital opportunities. The company can learn from these partners and evaluate with them how products can best be shown to advantage. By the way, information from existing customers about their user behaviour in the online world also helps here. And here too: test, measure, learn. Does the company already know how many customers search for and purchase the products with their smartphone? The strategy must be differentiated depending on the price point of the product. For a luxury brand, it can be very interesting to carry out low-priced tests in a "closed" channel or online platform to make the product palatable to new customers.

Tip: Share selected data that benefits suppliers and distributors and incentivise data-based decisions that lead to sales success in collaboration with your distribution partners. Make your NPS analyses available to your distribution partners or survey your wholesale partners as well, not just end consumers.

Translating customer needs into products and services

The product is not the business model. Generating a certain benefit, knowing the needs of the customers and, in the best case, anticipating them, that is the business model. The evaluation of internally and externally generated data helps to continue the tried and tested, but also to respond flexibly to changing needs.
Does the company know the value added contribution of each individual product or service offering? Which customer segment generates which turnover and profit? What is their medium and long-term potential? Radical thinking must be allowed in the company, to question something, to analyse the portfolio for the true value contribution.

Establishing a solid factual basis is crucial. Relying only on experience or business instinct is dangerous. Getting to know customers, testing ideas on selected target groups or forming a customer advisory board are components of a digital strategy. All of this, including evaluation, can be done most easily and efficiently digitally. The instruments for this do not have to be invented. They have existed for a long time. However, the team must have the chance to determine the appropriate tool itself or at least be provided with temporary freelancers. Students, digital idea platforms, cooperation with universities of applied sciences are cost-effective ways to gain access to new, digital knowledge and to become aware of potential employees.

In the end, it is not the company that designs the product of tomorrow or the new service, but the customers themselves - precisely fitting, according to their wishes and perhaps already with a pre-order ...

Tip: You and your team should learn to say "no" in a qualified manner. The more detailed your data, the easier it will be for you to quickly take a stand on supposedly brilliant ideas and make decisions based on facts. This will help you focus on the projects with the greatest potential for success for your team and your company.

Step 3: Benefit from data

How they add value to their data

In the previous two steps we have already shown how to analyse the business processes and decide what can be kept, what has to be changed and which interfaces have to be considered.

Planning all variables - the backbone of digitalisation

Now the business processes are mapped in a so-called Enterprise Resource Planning software (ERP) and the required data is integrated. Here, all resources in terms of capital, personnel, operating resources, material as well as information and communication technology are planned, controlled and continuously optimised in a timely manner and in line with requirements. Parallel to this, the training of the employees takes place. A step-by-step approach is also possible, whereby the results are checked after each partial introduction and the programming is improved. The goal is to create a cockpit that makes it clear at all times where the company stands.

Part of the cockpit are also key figures of the Customer Relationship Management (CRM), i.e. for managing customer relations, for example when and how each recorded customer was contacted, what the individual buying behaviour is like, etc. The cockpit can also be used as a tool for the management of customer relations. Since acquiring new customers can be up to five times more expensive than maintaining relationships with and reselling to customers you already know, it's worth investing here. Which customers have not ordered for more than a year? Can new products be targeted to specific groups? People respond to stories - the most successful newsletters are characterised by telling a story about the product that fits the target group exactly.

An important part of the data set should be a measurement that indicates the extent to which customers are satisfied with the company's services or products and whether, in the best case scenario, they would even recommend the company to friends and acquaintances. The so-called Net Promoter Score (NPS) - or recommendation rate – is a key figure determined from ongoing customer surveys that is directly linked to the company's success.

The NPS helps to identify and correct problems that could negatively affect customer loyalty in a timely manner. After a website relaunch, a telecom company only became aware of the fact that the entire login area for fixed-line customers no longer worked because of NPS customer feedback. The internal IT had no early warning systems and had to rely on direct customer contact to solve the problem.

Tip: Ideally, integrate the software for controlling the equipment with your own staff. This way you get a truly customised solution, interfaces can be continuously checked and adjustments can be made in-house. Take your time to evaluate an ERP or a new e-shop. Standardised solutions from the cloud are cheaper and easier to use for most companies than complex, powerful individual solutions. The omission of functions pays off in reduced complexity within a short time.

The attention of search engines

Customers should not only be informed online about products, services or the team. It is advantageous to position core topics holistically: with a blog, thematically related videos or audio contributions - for example on the cultivation of raw materials used - or stories, editorial texts on relevant topics. The website is a content hub into which social media activities can be integrated.

The above-mentioned measures help to make the website and its content easier and more targeted for users to find - and this in an organic way, without the provider having to pay the search engine operators. The more relevant and comprehensive the communication on one's own website, the easier it will be found by the search engine. Agencies often recommend focusing on one's own brand so that it appears at the top of the results list. However, the agency and the search engine usually earn money from this recommendation, but not the company if it has a well-known brand.

The aim of "Stories" is to offer visitors relevant and exciting content at a central point, which ultimately facilitates information gathering and positively influences the purchase decision in their favour.

The advantages of a so-called content hub are therefore obvious:
It creates greater reach and the company gets to know the preferences of existing and future customers better. Subsequently, the user experience can be continuously improved. This strengthens customer loyalty and leads to the desired purchasing behaviour. Here, too, the test-measure-learn approach applies to see which stories work on which channels and how.

A good side effect is that this creates a brand world of its own, which reflects the values of the company and shows how it is embedded in the market environment.

Tip: Check whether there are suitable partners whose content can be reproduced on your platform - perhaps you work together with a renowned environmental organisation, for example - and benefit from their reach in this way. Or: help your physical partners without an e-shop by giving them access to your own e-shop: if, for example, your retailer cannot sell your products digitally, you could offer your own website as an e-shop for the retailer ("whitelabel e-shop"). This way you generate data and the retailer gets a webshop.

A digital platform means the future

An essential part of digitalisation is that the world of data enables us to form virtual communities. Today, we already interact as parts of various digital communities: in online crowdfunding, for example, but of course also on Facebook, LinkedIn or Twitter. Entire business sectors thrive on bringing people together. Just mention AirBnB or Uber.

In each environment, there is an opportunity to create a custom-fit community that generates value for all stakeholders.

An example? While car manufacturers have so far only sold the latest model to individuals, it could become profitable in the future to join forces with car-sharing providers and jointly tap into new target groups. Depending on the purpose and business model, strategic platforms can take a variety of forms. Digital financial service providers could approach car manufacturers' leasing banks (they mostly do not want to offer traditional banking) to sell more efficient and cost-effective products to lessees digitally.

The customers' perspective is decisive. User-friendliness and an immediate benefit should be in the foreground for them. Security of use and protection of privacy ensure trustworthiness - platforms such as Facebook have had to pay dearly in this respect in the recent past. Scalability is an equally important factor, as it is important to increase sales without having to make major investments in production or infrastructure.

There is plenty of scope for innovative ideas. Those who know the needs of their existing and future customers will soon be able to offer them the ideal product solution or the long-awaited service.

Tip: Talk to your team regularly not only about what you can achieve tomorrow, but also create creative space for the future of your organisation or company. You can also transform successful physical concepts into the digital world - if, for example, you have an outlet for your products, then open this outlet to the digital world and use it to build a new, worldwide outlet channel. Branding problems can be easily circumvented through separate platforms.

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