2010 in Review: The coming Digital Transformation

If there is a single thought that sums up what 2010 has meant to Digital's impact on business, it should be that this was the year that signaled the coming of the next great phase in Digital: Transformation.

• 360-degree customer contact transforming into 3-Dimensional relationships, 365 days a year through the explosion of location (and time)-based services such a Facebook Places, Foursquare and Gowalla
• Emerging conversations about 'offline digital engagement' that are replacing buzz about the shiniest new app with focus on individual human needs and real-world behaviors, and how brands can maintain relevance...driven by growth of social shopping, m-commerce, and mobile couponing.
• Increasing struggles to clearly define Digital (or is it technology?) ownership across IT, Marketing and the Business with talk about emerging needs for new hybrid leadership roles such as a Chief Marketing Technologist.
• Companies' digital strategies expanding from marketing calendars to market disruption, risk management and digitization of the business.
• Channel marketing becoming more cumbersome as Digital blurs traditional boundaries, evidenced by Kraft's integration of Digital marketing with Shopper marketing and traditional B2B companies transforming to B2X as Digital efforts spread across business units, sales, service and innovation.
• Forrester's Splinternet being joined by forces of convergence and acceleration that are exponentially increasing complexity while pulling the planning horizon ever closer.
• This year's launch of iPad?  An important but expected next step as the Three Screens of TV, Web and Mobile have blurred into 4.5 screens (and counting) that seamlessly blend Web, social, data, voice, video, communications, applications and communities on the way toward platform-agnostic operating systems such as the Sony's Android-powered TV.
• Mobile Strategy? Social Media Strategy? Web Strategy?  All inseparable parts of a broadening whole increasingly integral to achieving core business objectives.

And most of all, 2010 was notable because companies and their leaders increasingly recognized that the biggest barrier to Digital growth is often not technology (as challenging as that can be), but their own organizations, structures, processes, people, and ability to transform in preparation for a dramatically changing future.

Three Forces Shaping the Digital Future

For companies trying to plan their digital future it can often feel like jumping onto a speeding rollercoaster...afraid to miss all the 'fun' yet keenly aware of the tremendous risks of doing it wrong, and with few reliable examples to follow as a guide. 

Consider the incredible change taking place:

• Apple's App Store has some 250,000 applications, downloaded more than 5 billion times to some 100 million devices. All in just 2 years.
• There are more than 400 million active users on Facebook. There were barely 1 million just 5 years ago.
• Time spent on social media sites has doubled from this time last year. 1 in every 4.5 minutes online is spent on blogs or social networking sites.
• This year digital music sales will equal CD sales.
• The number of AOL subscribers dropped from over 25 milllion down to 5 million in just over 6 years.

Forrester Research has even begun referring to the next phase of the Web as the "Splinternet," describing the rise of powerful connected devices, the spread of social technologies and the end of the golden age of Internet standards.

Too often companies' lack of clear direction results in an expanding series of loosely connected tactical reactions without needed organizational commitment to a specific strategy.  And while each initiative may generate positive results, this approach leads to ever-increasing complexity in execution, lack of needed alignment and support, redundancies in costs and effort, and minimized total benefit to the organization.

So, how can leadership possibly commitment to a long-term course of action when faced with this increasingly complex and blurry future?  The first step is to recognize the three primary forces driving this change.  

The Three Forces:
Fragmentation, Convergence and Acceleration

Force #1. FRAGMENTATION: This is Forrester's Splinternet. Yesterday's internet-enabled global Web community is quickly becoming a vast network of individual (and often highly separate) experiences, interactions and devices. And with the explosion of mobile capabilities, these digital experiences are increasingly untethered and triggered by and integrated with real world activities through location-based capabilities.

In short, the virtual world is now racing to catch up with the real world. Experiences and interactions are expanding beyond the two dimensions of computer screens to include the  dimensions of space and time.

Even the ubiquitous nature of search is transforming from today's algorithms that sift through a global bucket of public information to infinite, discrete social/community-driven recommendations based on user-generated content that (currently) is often not visible to search engines.

Force #2. CONVERGENCE: Think back just a few years ago and consider the choices of electronic devices--cameras, PDAs, computers, phones, CD players, DVD players, video game consoles, GPS systems, remote controls, calculators and even pagers. Today, one device will do all these tasks and more.

Apple CEO Steve Jobs spoke directly to the impact of convergence when he introduced Apple's "Digital Hub" strategy at Macworld 2001.

 

As another example, video game consoles don't just create new ways to play games. Through integrated Web capabilities and social tools they create a completely new way to participate and engage. Digital technologies—once accused of pulling kids away from human interaction—are now enabling people (not just kids...today's average gamer is 34 years old and over 40% are women) to socialize with each other in completely new ways. In the process they continue to create important new centers of gravity in the digital space.

Force #3. ACCELERATION: Question: What do iPhone, Android, Facebook, Hulu, YouTube, Twitter and Google Apps all have in common? Answer: None existed five years ago. And this pace is only accelerating:

• Of the 5 billion App Store downloads in 2 years....4 billion were in the second year alone.
• It took Facebook over 4 years to reach 100 milllion users. They added the next 100 million in just 8 months, and the next 100 million in only 5 months. 
• Projected sales for the iPad in the first quarter after launch was $1billion.

However significant the impact of the first two forces of Fragmentation and Convergence, their influence will only continue to increase in speed and intensity, fundamentally changing everything from how we go to market to the ways Moore's Law meets Generation M (or is it I? or Z?)

So Now What?

No matter the dramatic changes Digital is driving, the basics of business still apply. Strategic success requires long-term commitment. As Amazon's CEO Jeff Bezos notes: "If we have a good quarter it's because of the work we did three, four and five years ago."  

And there's the rub:  
How can businesses stay competitive in an environment that changes by the week when the company requires months and often years to adapt? More to the point, how can leadership possibly decide on and commit to a strategy that may be obsolete before it can ever be realized?

• Only commit to short-term strategies? Minimizes risk and is responsive to the market, but is often highly reactive and lacks needed resource to generate any significant impact or sustainability.
• Fully commit to a longer-term strategy? Critical to ensuring needed organizational momentum and advantage, but has a high risk of missing not only the long-term mark, but also numerous short term opportunities along the way.

Certainly, there are no silver-bullet answers, but here are some keys to help your company prepare:

• Think People first...then Technology: Trying to stay ahead of (or even keep up with) the latest greatest digital shiny object is a high-cost, high-risk game that offers slim opportunity for sustainable success. Instead, keep focus on the fundamental needs of customers, employees, partners, etc., and then think about how technology helps satisfy these needs. Social media may seem new...but people being social isn't. 
• Focus on alignment with corporate strategy: Start by looking at how Digital enables the organization to achieve established goals. Think through the business opportunities (and possibly new risks) that Digital capabilities could create. 
• Look upstream: As I wrote about in The Risk of Competitve Benchmarking, many companies become so focused on competitors that they miss important learnings from other industries that are early Digital adopters.  It's a unique opportunity to literally see into the future. B2B companies in particular are in an excellent position to watch and learn from B2C companies and leapfrog the competition. Unfortunately few do and continue to waste valuable time and money on lessons already learned by others.
• Build your Digital DNA: To compete in the Digital space a company needs Digital DNA, meaning Digital needs to be more that just marketing tactics...it needs be a part of the culture for everyone in the organization. It's not always easy, but it's rarely optional.

Predicting the future is always challenging...particularly in the Digital space. But the price paid for inaction continues to climb as Digital continues to transform the landscape. By understanding the underlying, long-term forces at work, companies can move from disjointed, reactive efforts to establishing a clear path forward that drives consistent, sustainable success.

The Risk of Competitve Benchmarking

"Benchmarking competitors will ensure this effort will fail."

Not the most welcome (or expected) statement you can make to client leadership. Especially when you've been hired to do just that. But that doesn't make the statement any less true.

Competitive benchmarking is roundly accepted as a key foundational element to any digital strategy. It's often the first step companies take in gathering insights...and too often the only one, which is the problem.

Let's be clear...competitive benchmarking doesn't inherently create risk...but the narrow approach many companies take does.

There's questionable incremental value in conducting yet another extensive, formalized competitive benchmarking effort
This is especially true given the healthy, ongoing obsession most organizations have about their competitors. It's the rare company that can't already recite every digital initiative in their industry. And between existing research, trade publications, industry experts, blogs and strategic hiring there are usually few stones left unturned.

Mirroring competitors behaviors often mirrors their mistakes or misses important evaluation.
Technology is a perfect example...Company A wants to use the same technology solutions as the industry leader. Often a very bad idea because it ignores two critical factors.

1) The competitor may be years ahead from a technical/organizational maturity POV, so Company A risks overspending for overly robust systems that increase development and onboarding costs while often decreasing adoption and productivity due to complexity.
2) Just because a competitor has a technology doesn't mean it works. One leading CPG was the envy of the industry, winning countless digital awards. What wasn't as widely known was that their systems were being held together with twine and tape, costing the organization millions.

At best, benchmarking can only help a company achieve parity.
And even that is increasingly unlikely with the ever-quickening pace of change digital continues to drive. Consider that Facebook grew from 175mm to over 350mm active users in less than a year. Now think about how long it took your company to build their last Website...and add at least another 6 months if it was on a new platform...and all of that just to start to drive more customers. Meanwhile, the competitors you benchmarked have moved on to...?

The last point is often most critical to creating an effective digital strategy. Even if your strategy is to defend share, competitive benchmarking alone will not provide the needed insights to prepare for future competitive threats.

Competitive benchmarking is best leveraged as part of a greater whole that provides a balanced vision of the marketplace and your customers.

• Start with your customers. This can't be restated enough. Put aside the Web analytics and focus on the basics of who your customers are, their needs and how you do (or can) help them. Knowing what your customers are doing is important...knowing why they do it creates advantage.
• Look outside your industry. Customer behaviors are rarely specific to a vertical. People apply existing experiences and behaviors to new situations. Banking and insurance shopping/buying patterns are very similar to each other. People will look for a new vacation home in much the same way they found their last car...or TV. Identifying parallel industries creates broader insights and provides needed perspective to evaluate competitors.
• Look upstream. By definition there are very few companies leading digital innovation. And many of those are start-ups...not industry-leading businesses (i.e., your competitors). Following on the previous two points, looking upstream to digital innovators expands your digital horizon and helps your company better anticipate future opportunities and threats. So what if Moms aren't socializing about your cereal. What's important is that they are socializing more and more, which means it's your next important opportunity or threat...no matter what your competitors are doing now.

So, a more accurate opening statement probably would have been "Only benchmarking competitors (with the implied 'as you are now doing') will ensure this effort will fail."

More accurate...but less startling...and what's the fun in that. Try it for yourself and let me know how it goes.

Three Paths Forward For Healthcare

“What Should We Do First?”

Redesign our Website? Deploy a new intranet platform? Find a way for employees to collaborate? Build a patient portal? Launch some Social Media…something?

These are common questions we hear every day from healthcare leaders trying to balance seemingly infinite digital opportunities with clearly finite resources. The challenges aren’t new, but they are becoming more urgent.

• Healthcare providers are falling further behind in meeting the expectations of healthcare consumers / patients.
• Most healthcare organizations lack the agility to keep pace with the exponential changes in Web technologies.
• Gaps are widening between departmental/employee needs and the organization’s ability to deliver.

In truth, there is only one question healthcare organizations need to answer: What digital path forward are we going to take?

There are three possible answers:

1. Triage – Keep the lights on

• Lowest short-term cost
• Does not address organizational challenges
• Highest mid/long-term risk and cost
• Potential negative impact on ‘real world’ investments

2. Targeted – Investments/upgrades in select Web technologies

• Reduces short-term risk
• Limits short/mid-term investment requirements
• Limited impact on organizational challenges
• Limited opportunity to move beyond parity in market

3. Transformational – Take patient experience to the next level

• Greatest short-term cost
• Greatest mid/long-term risk reduction
• Minimizes organizational challenges
• Establishes sustainable excellence
• Creates significant competitive advantage

By selecting one of these paths, healthcare organizations can quickly define the scale and scope of future efforts. This also establishes a clear goal to evaluate how effectively each opportunity (e.g., Web redesign, intranet, patient portal, Enterprise 2.0, social) helps achieve that goal.

Organizations should be cautious about applying a “good, better, best” evaluations to these options. While Transformational may appear the grandest and most impactful of the options, the Triage approach can be the most appropriate for many companies based on organizational/technical maturity, agility, existing systems and processes, and time horizons.

Instead, the choice of Triage, Targeted or Transformational should be based on:

1. Support of organizational strategy and leadership goals
2. Alignment to audience needs/expectations
3. Effective Governance

Of course, resources are always an influencing factor but should not be a deciding factor in selecting the digital direction for an organization.
As the rate of change in digital technologies and audience expectation continues to increase, so will the variety and complexity of opportunities…and the critical need for healthcare organizations to clearly define a path forward.

B2B is the new B2C

B2B companies need to think more like consumer companies to be successful.

That shouldn’t be news, but somehow it still is. In fact, it’s more true in today’s digital marketplace than at any time before. It’s because the thin line between the two has been all but washed away due to the continued integration of the Web into our lives and the explosion of mobile and social media.

What’s most interesting is how many B2B companies will simultaneously argue that B2B “is different” while citing B2C examples. Case in point…yesterday we had a typical first meeting with a B2B company…

Client: “Don’t show us any consumer retail sites you’ve done…we’re only interested in your B2B experience”

US: “Ok, here’s our B2B work. Now, what ideas did you have for your new site?

Client: “Well, we want to suggest products like Amazon…doing videos like YouTube would be a great way to show our product benefits…we want to talk with customers like on Facebook…”

Exactly.

People’s expectations are established by their most common digital experiences. We don’t think of ourselves as “employee,” or “director.” We just know that buying a new computer this weekend took about :30 seconds, so we’re frustrated by some 7-page online form to get an estimate.

We instantly share photos of vacations with friends across the country, but can’t download or share a product photo without baring our demographic souls? We can easily find the most popular toys for a 10-year-old, but not the best shirts for my employees? Forget it.

So, what does thinking like a consumer marketer mean? It means:

• Think about engaging, not just informing: First, show customers that you understand their problems and how you can help. Many B2B companies drown potential customer in product descriptions and detail. Yes, this information is important, but even engineers prefer an experience to endless spec sheets.
• Think People, not just organizations: No “company” ever made a purchase decision. A person (often lots of them through complex interpersonal relationships) did. B2C companies don’t think of parents as “child care providers.” In fact, even “mom” is too broad of description in a marketplace driven by individual micro-targeting. Learn who the people are beyond the titles and the “accounts” and “companies”will solve themselves.
• Think Needs, not just products and services: What are customers going to use your product or service for? Whatever you’re selling, it’s a means to an end. Think situations and solutions – the ends you solve — along with products and services. Show your customers how important they are. How well you understand their needs and challenges. Don’t make customers figure it out for themselves.

Doubts that we’re right about this? I’d love to hear them.