To Be A Digital Business You Need To Digitise First

There are few things more frustrating than initiating a service request through your digital channel of choice, only to be kicked out halfway through and told to call the contact centre, fill in a paper form or visit a store.

Our expectations have been set by the digital giants: Google, Alibaba, Amazon, Facebook etc. Anything that falls short of their benchmark-setting experience doesn’t quite pass muster. Failing to adapt can have dire consequences for an organisation. Kodak, Blockbuster and Borders are cases in point.

But to be a digital business you must digitise first. Research by Jeanne Ross at MIT refers to the operational backbone as being one of 5 key building blocks of digital transformation. Earlier research by Jeanne had pointed to a success rate as low as 28% for companies digitising successfully.

What is an operational backbone?

An operational backbone is the way the core processes that create value for the organisation are configured in a standardised and automated way. Think about the major platforms in an organisation: the CRM, ERP, Corporate Centre systems and how they are linked together. It is the basis for operational excellence.

Without an operational backbone, it is highly likely your people will be spending too much time just keeping the system running: shepherding orders through the process, reconciling data across platforms, fixing up errors and rework, managing remediation projects.

Why is it so hard?

Decades of corporate evolution have left many mature organisations ensnared in a tangled web of process fragments and legacy technology. Unpicking the mess  is not for the faint hearted and requires deep pockets. The financial benefits are not always immediately obvious, especially if back-office resources have been offshored to low-cost locations. Yet the typical business case doesn’t factor in the optionality a digitised business can create.

Even if the executive team take a leap of faith and push on with a digitisation plan, then the real challenge begins. How do you untangle the mess?

What To Do?

There are three practical steps to take:

1. Product Rationalisation: the first step may seem counter-intuitive, but it’s a case of one step backwards, 5 steps forward. The objective is to make the operational backbone journey easier by discarding products that create operational clutter and clustering remaining products into families where the variation is essentially a feature of the product not a product in its own right. This makes it easier to consolidate processes.
2. Product Modularisation: the next steps is to separate products into modules and, for each module that is perceived to create value for the customer, identify the features and the allowable attributes. In an automotive analogy the customer can make choices about the colour, the engine size, the interior décor etc., but for each feature there are a limited number of options to choose from e.g. six choices of colour, two engine sizes. Notably many aspects of the product are not customisable – or a least not without paying a very hefty price. Next time you buy a car ask how much it would cost to vary the chassis length. In a service sense this can be as simple as identifying the fields of data that will be collected when onboarding a new customer and one of the options will be the list of salutations e.g. Mr. Mrs, Miss, Ms, Dr. etc.
3. Operational Excellence: With these two steps underway it becomes much easier to execute an operational excellence agenda. Good process governance lies at the heart of any operational excellence agenda. If you don’t have it in place, start with this first – and its more than just documenting processes! In simple terms, the next steps are: Control->Stop->Consolidate->Standardise->Simplify->Automate. Implement these stages along major value chains. Also identify common capabilities across value chains so you build capabilities once and re-use e.g. customer onboarding. Apply the same Control->Stop->Consolidate etc. approach for these common capabilities.

It’s not sexy. It’s not cutting edge. But without following the implementation path above you will not reap the digital opportunities that abound.

Written by Nigel Adams.

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