The Most Valuable Time To Build Relationships With Customers: Post-Sale

Shelly Kramer

When it comes to customers, are marketers better served focusing on acquisition or retention? And what’s the proper balance of each?

Any marketer worth his or her salt knows that the most valuable customers, and your biggest source of business growth, lies with your current customers. As such, the most valuable time to build relationships with your customers is post-sale. Think about it: A current customer has already said yes. They already trust you. They trusted you enough to buy, anyway. Focusing on those customers post-sale is without question, the most important part of developing an ongoing relationship with them, and it’s not at all hard to do. Let’s explore.

The case for customer retention

When it comes to customer retention, marketers are historically short-sighted, as are their counterparts on the sales team. While acquisition has traditionally dominated retention as it relates to marketing strategy focus, in fact the statistical evidence points firmly towards a solid retention strategy as delivering the best ROI. The fact that we’re still talking about this amazes me: I remember learning this in my earliest days in marketing—in fact, it’s pretty much Marketing 101. Yet we still see sales teams chasing new customers and marketing teams equally focused on acquisition as well.

Consider the stats laid out in this infographic from Retention Science:

Retention-Science-Infographic

As you can see, existing customers are the veritable foundation upon which you should build your business. They have the potential to create more sales and make a greater contribution to profits, all at a lower cost to the business than what you will spend attracting new prospects. What’s not to like about that? And why the heck aren’t more marketers concentrating on customer retention strategies? Here are three things that might explain why:

  • It’s easier (and more exciting) for both sales teams and marketers to focus on drumming up new business.
  • A customer retention strategy takes time to produce returns and marketing departments (and sales teams) are under constant pressure to produce short-term results.
  • The return on investment for customers over the long-term is harder to measure than new customer sales and, therefore, harder to justify.

The importance of understanding your customer lifetime value (CLV)

For those who understand the value of retention (or who want to), embracing a customer lifetime value (CLV) mindset is key. CLV is a model that takes a long-term view of customers, estimating the value of future cash flows, and not just historical sales. It’s a complex subject that I’m not going to get into here in detail, but if you want to explore this more fully, I highly recommend you read Avinash Kaushik’s Guide to Calculating Customer Lifetime Value. I love his blog, and his big brain, and once you read this guide, I predict you’ll be likewise enamored. More importantly, thinking about CLV as he breaks it down will help you as you create your own customer retention strategies.

The point is that while the majority of companies see value in CLV as a concept, only a minority report that they are able to put it into action. According to an Econsultancy study more than three-quarters of companies (76 percent) considered CLV to be important, but less than half (42 percent) actually said that they were able to measure it. Worse still, just 11 percent said that they “strongly agree” that they could measure CLV, meaning that a mere one in every ten companies would appear to have fully grasped the concept.

CLV chart Graphic source: econsultancy.com

Customer retention strategies: How to build post-sale relationships

So if I’ve managed to convince you about the importance of this, please know that an effective customer retention strategy does not mean sending random email blasts to your new customers focused solely on generating interest and more sales. You need a communication strategy with this customer base that delivers ongoing value post-sale and continues to build trust and credibility. You don’t need to constantly be selling them, but you do need to be touching them on a regular basis so that you don’t become just another commodity. There are myriad things you can do, including:

  • Provide memorable customer service. That means empowering your front line staff (online or off) with real time customer information, so that questions can be answered and issues resolved without delay. You want to be proactive, rather than reactive, and build good relationships by meeting—even exceeding, where possible—customer expectations.
  • Listen and learn. Encouraging feedback from customers, both positive and negative, is a great way to understand their likes and dislikes, as well as their needs and wants. Monitoring reviews and social commentary on your brand can provide invaluable insights into what customers are looking for.
  • Everybody likes attention. Feature your customers, and their stories in your eNewsletter and/or by way of short video interviews that can live on both your website and your YouTube channel.
  • Reward loyalty. Build strong loyalty programs that reward ongoing business. Customers may like patronizing your business, but they’ll like you even more if you reward them from time to time for being a great customer. This is easy to do, and can be very cost effective, yet go a long way toward establishing strong relationships.
  • Remember that referrals are a gift. A referral from a satisfied customer is the best kind of gift—don’t take that for granted. Don’t forget to establish referral programs that reward customers for sending you business.
  • Pay attention, pay it forward. Find and follow your customers in social media channels. Share their stories, support their marketing efforts, introduce them to your other customers. Relationships are a two-way street, so remembering that, and putting that into action can go a long way toward building customer relationships that are long and mutually beneficial. Social media makes that easy.

How to not be a commodity: Educate them about your other offerings

Once you’ve got the relationship-building part under control and in process, know that you do need to continue to touch and educate your customers about the other things you do and sell and how you might serve them. As an example, we once had a customer who sold aluminum bleachers to schools and community centers. When I asked about what happened after the sale, our client said that the last contact with a customer was a “your product has shipped” email notification, and that was that.

What they weren’t taking into consideration is that their clients largely found them online, and once the sale was over, they risked being forgotten by customers who might not remember where they purchased. Those same customers, however, might also need things like gym flooring, soccer goals, basketball goals and nets, or pool equipment. But they weren’t staying in touch in any way at all with those customers after their initial purchase, nor were they making any effort to let those customers know other ways they could be of service, thus making those other sales largely impossible. We changed that, and guess what? They sold more stuff as a result.

Whatever tools and tactics you use to develop a retention strategy, it should be built around one clear goal: Building a post-sale relationship with every single customer is the key to business growth and profitability. Court new customers for sure, but don’t ever lose sight of how valuable your existing customer base is. And make sure your marketing efforts are designed to keep those existing customers top-of-mind.

What loyalty and retention strategies do you employ for your business or for your clients? What do you have to add to the list above? I’d love to hear what’s working for you and any lessons you’ve learned along the way.

 

This article was originally seen on The MarketingScope.

The post The Most Valuable Time to Build Relationships With Customers: Post-Sale appeared first on Millennial CEO.

Photo Credit: Polycart via Compfight cc

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Four Ways The Travel Industry Will See Future Growth

Himani Sharma

In a recent interview on S.M.A.C. Talk Live, Paul Pessutti, SAP’s leader for the travel and hospitality industry, talked about his ideas about the future of the travel industry. In the interview, Pessutti indicated four areas where travel brands, such as hotels and airlines, would need to embrace technology better to find success.

Travel brands must learn to communicate

Most frequent travelers have a story about lost baggage or missed flights. In fact, the Bureau of Transportation Statistics indicates that nearly 20% of all flights in 2017 were either delayed or canceled, and more than 11,000 were diverted. Sadly, when these problems occur, airlines do too little to communicate, both within their companies and with their customers.

Pessutti stated in the interview that he believes to be successful in the future, airlines need to overcome this particular fault. He said, “We all have a mobile device, we’re all plugged in, all the time. If the airlines are able to communicate with us in a way that we understand the disruptions, we know why it’s happening, what’s going on, what’s next, and what they’re planning to do about it, we’re a lot more forgiving.” The technology is already in place for airlines and airports to offer such communication, but it will be critical that they utilize it and expand it.

Some airlines are already offering a higher level of communication, and consumers are responding by booking with them. CNN reports that Delta now offers a service that sends messages to customers’ phones to help them track their baggage. This is the type of service that fosters customer loyalty, and that encourages them to spend more money even when low-cost options are available.

Travel brands must leverage data more effectively

Data is a buzzword in many industries, but in the travel industry, it is not yet being utilized to the fullest. In fact, many companies find the sheer amount of data available to be overwhelming. In the future, they will need to find tools to help them analyze and use that data.

Data can be used to reach customers more effectively. It can also help airlines maintain their equipment more effectively, which will also improve customer service. For example, airlines need to avoid delays. One way to do this is to make maintenance processes more streamlined and intuitive. The Internet of Things enables this, with sensors collecting data from aircraft, which can be used to make proactive maintenance decisions and avoid unnecessary downtime. Adding sensors to the entire airport infrastructure, including bag drop stations, baggage carousels, boarding gates, and even elevators, will keep both staff and passengers connected and informed and remove common travel stress points.

Travel brands must learn to personalize

One of the benefits of the data that is available to today’s travel companies is the ability to create custom, personalized travel experiences for customers using that data. Yet brands are not doing this. Pessutti referenced a trip to Madrid that he took during the start of the football league season. He had spent time tweeting and posting about his desire to find tickets to a Real Madrid game. When he arrived at his hotel, he still had to get his tickets. “This is something that a hotel chain that knows me very well could have been very proactive, helped me secure those tickets, get us booked there, and then have that waiting when we checked in,” he observed.

The potential of personalization is extensive, and it will build loyalty by making customers enjoy their travel experiences better. An airline could welcome a passenger landing at a new destination and recommend a place to eat, and the hotel could utilize data to offer a customer age-appropriate toys for their children or directions to the person’s favorite coffee shop when they arrive. In the future, travel customers may be able to see more personalization from their favorite travel brands.

There is one potential risk to personalization, however, and that is the fact that some consumers may find this particular type of innovation a bit disturbing. Knowing that hotels, airlines, and railroad companies are monitoring social media and online behavior is something some consumers will have trouble accepting.

According to Pessutti, it is possible to create personalization without breeching any customers’ ideas of privacy. Huffington Post agrees, pointing out an area where personalization can be woven into travel experiences without crossing any boundaries. Travel brands can assess what their customers need based on interests, demographic, and physical location, pushing notifications at the moment when travelers are away from home that will draw in more business and make the travel experience more memorable.

Travel brands must build connections with each other

To use and leverage data more effectively, the infrastructure of the travel industry must change. “The real problem is the overall platform and infrastructure that these properties and the airlines are running. They’re running in silos,” said Pessutti. “They are not connecting this together and leveraging the power of a platform where they can plug-in these different data sources and analyze that in real time.”

In other words, the airlines, hotels, and other travel brands have data about customers, but they are not working together to create a travel experience from start to finish. Pessutti anticipates that this will change and feels that the brands that embrace the change first are the ones that will rise to the top in the future. Brands that can create a common digital platform will be able to use the information to improve the customer experience.

Though they may be slow, changes are coming to the travel industry. According to Pessutti, those changes will bring many positives to both travelers and travel professionals. To learn more about these changes, listen to the full podcast interview.

Hear the full podcast episode here. Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value by reading Accelerating Digital Transformation in Transportation.

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The Next Big Step: Three Ways We Can Build Sustainable Commerce

Joseph Ballard

Is the business of commerce and marketing completely at odds with the UN’s global goals for sustainable development? On the face, it appears, yes. But digging deeper, it’s possible to envision a future with greener ways of doing commerce, driven by new technology enablers and a mindset change in how we sell and consume things. Software vendors will be key to that change.

I was recently talking to the head of communications where I work. We were both excited about SAP’s corporate alignment to the global goals, but were wondering – how does this apply to Hybris, the part of SAP that creates commerce, sales, and marketing software? Surely, if anything, our products drive greater – not less consumption – more goods consumed by more people, encouraging more waste, and more atmospheric carbon.

There are many ways that SAP can aid the delivery of a more sustainable future, but for our part – the commerce and marketing area – it felt like, well… not so much.

This got me thinking and researching. I was surprised and inspired by what I found.

Three ways we CAN build sustainable commerce

All evolutionary rather than revolutionary ideas, I am building on the notion powerfully put by Paul Hawken, then actually achieved by the inspirational Ray Anderson of Interface Inc.: we have to work with, not against, market supply chains and principles, and use the power and reach of the modern corporation to deliver lasting sustainability.

It’s exciting to see how new technologies can be a catalyst for sustainability in ways previously not feasible. The switch from small and niche CSR projects to big and mainstream sustainable operations is on.

The consumer is also at the heart of this. Meaning you, me, our friends, families, and associates, and the decisions that we make every day about what we buy, how we buy it, and who we buy it from – hold all the leverage. It merely needs to be empowered by visionary corporations.

To tweak the famous philosophy of Mahatma Gandhi, we need to find ways to “consume the change we want to see in the world.”

Step one to building sustainable commerce: Supply chain transparency

We a rarely think about it, but the supply chain required to deliver even common products into our hands is surprisingly complex. We should consider supply chains more – it’s hugely important to our consumption footprint. The extraction, production, and transformation of raw materials into nice, shiny goods is the engine room of pollution and resource degradation.

Excuse all the tech-jargon and acronyms, but I think it’s now possible to envisage how ERP (Enterprise Resource Planning) and SCM (Supply Chain Management) software can be coupled with IoT (Internet of Things) and Blockchain ledgers, then fed through the PIM (Product Information Management) applications that enable our online searching and shopping journeys, creating an integrated constellation of technologies that would allow a deeper level of transparency into the industrial and consumer supply chain than ever before.

In plain English: as a prospective customer, before I make any purchase, I could be given accurate insights into the component sources and costs, labor conditions, carbon footprint, and environmental implications needed to get the goods from the factory to my front door, or from the farm to my fork.

We live in a world that’s dense with data. These days, it’s all out there, waiting to be harvested. Check out Olivia Tyler’s inspiring talk on supply chain transparency.

I accept the limitations: all this detail wouldn’t be that useful or effective during the average time-stressed trip around a local grocery store.

As our shopping habits shift online and we put increasing time into browsing and researching using our smartphones and tablets, this kind of information can become integral and – eventually – a hygiene factor to the shopping process.

Step two to building sustainable commerce: Enlightened choices and preferences

Building on the first idea, what might a shopper do with all this new data and enhanced transparency? One of the great things about e-commerce is the ability to set parameters and store preferences. We can save a regular basket of essential groceries at Ocado. We can sign up for Amazon Prime and get next-day delivery. We can let Netflix scan our viewing habits to suggest our next watch.

We could set sustainable preferences for how we want to shop, like preferences for delivery speed and environmental impact. Or preferences for how we engage the value chain – e.g., preferring to select a product sourced from a small, start-up manufacturer, rather than a global multinational. The choice would be ours.

My bet is if consumers were conveniently given visibility and choice, we would think more about the impact of our purchases, and we WOULD choose differently, especially if prompted by smart marketing algorithms.

The next step: imagine building a sustainable shopping profile across multiple retailers with rewards, donations, or environmental credits based on your shopping history. Like some kind of mash-up of Amazon Prime, Facebook, and the multi-brand loyalty scheme like Nectar Card. Sure, it would take some negotiation between businesses to create this, but make no mistake, the CRM tech is out there to make this happen!

Step three to building sustainable commerce: Product-as-a-service

A lot of great articles are already written on this. Suffice it to say, there are products and industries like automobile, home entertainment, lighting, high-end fashion (to name but a few) where we can expect the business model to be turned on its head as consumers move away from a ‘buy-it & own-it model’ and towards a pay-for-use / subscription/lease model.

The sustainable difference here is, it’s a far less wasteful approach to resource use. Supply is efficiently matched to demand, and products are utilized throughout their useful lifecycle. No more Audi sitting in the garage for 98% of its lifetime.

Certain retailers and manufacturers are already turning to these models. For those who haven’t seriously considered it yet, I have only one thing to say: hurry up!

The opportunity

So, my initial instinct that commerce and marketing have no place in the sustainable development agenda was wrong – actually, this is a huge moment of possibility.

The world is changing and we – consumers and corporations – must change with it. Companies that grasp this chance will find themselves on the right side of history, swimming in the same direction as their customers.

There’s also an opportunity for software vendors. By doubling-down on co-innovation partnerships with businesses and corporations who are willing to take the brave step into the era of Sustainable Commerce, we can jointly build a future that’s fair and just for the next generations to inhabit this planet. Now that’s a goal and a half!

For more on how emerging technology is transforming traditional commerce models, see Can Artificial Intelligence Drive More Ethical Retail?

This article originally appeared on The Future of Customer Engagement and Commerce.

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Hack the CIO

By Thomas Saueressig, Timo Elliott, Sam Yen, and Bennett Voyles

For nerds, the weeks right before finals are a Cinderella moment. Suddenly they’re stars. Pocket protectors are fashionable; people find their jokes a whole lot funnier; Dungeons & Dragons sounds cool.

Many CIOs are enjoying this kind of moment now, as companies everywhere face the business equivalent of a final exam for a vital class they have managed to mostly avoid so far: digital transformation.

But as always, there is a limit to nerdy magic. No matter how helpful CIOs try to be, their classmates still won’t pass if they don’t learn the material. With IT increasingly central to every business—from the customer experience to the offering to the business model itself—we all need to start thinking like CIOs.

Pass the digital transformation exam, and you probably have a bright future ahead. A recent SAP-Oxford Economics study of 3,100 organizations in a variety of industries across 17 countries found that the companies that have taken the lead in digital transformation earn higher profits and revenues and have more competitive differentiation than their peers. They also expect 23% more revenue growth from their digital initiatives over the next two years—an estimate 2.5 to 4 times larger than the average company’s.

But the market is grading on a steep curve: this same SAP-Oxford study found that only 3% have completed some degree of digital transformation across their organization. Other surveys also suggest that most companies won’t be graduating anytime soon: in one recent survey of 450 heads of digital transformation for enterprises in the United States, United Kingdom, France, and Germany by technology company Couchbase, 90% agreed that most digital projects fail to meet expectations and deliver only incremental improvements. Worse: over half (54%) believe that organizations that don’t succeed with their transformation project will fail or be absorbed by a savvier competitor within four years.

Companies that are making the grade understand that unlike earlier technical advances, digital transformation doesn’t just support the business, it’s the future of the business. That’s why 60% of digital leading companies have entrusted the leadership of their transformation to their CIO, and that’s why experts say businesspeople must do more than have a vague understanding of the technology. They must also master a way of thinking and looking at business challenges that is unfamiliar to most people outside the IT department.

In other words, if you don’t think like a CIO yet, now is a very good time to learn.

However, given that you probably don’t have a spare 15 years to learn what your CIO knows, we asked the experts what makes CIO thinking distinctive. Here are the top eight mind hacks.

1. Think in Systems

A lot of businesspeople are used to seeing their organization as a series of loosely joined silos. But in the world of digital business, everything is part of a larger system.

CIOs have known for a long time that smart processes win. Whether they were installing enterprise resource planning systems or working with the business to imagine the customer’s journey, they always had to think in holistic ways that crossed traditional departmental, functional, and operational boundaries.

Unlike other business leaders, CIOs spend their careers looking across systems. Why did our supply chain go down? How can we support this new business initiative beyond a single department or function? Now supported by end-to-end process methodologies such as design thinking, good CIOs have developed a way of looking at the company that can lead to radical simplifications that can reduce cost and improve performance at the same time.

They are also used to thinking beyond temporal boundaries. “This idea that the power of technology doubles every two years means that as you’re planning ahead you can’t think in terms of a linear process, you have to think in terms of huge jumps,” says Jay Ferro, CIO of TransPerfect, a New York–based global translation firm.

No wonder the SAP-Oxford transformation study found that one of the values transformational leaders shared was a tendency to look beyond silos and view the digital transformation as a company-wide initiative.

This will come in handy because in digital transformation, not only do business processes evolve but the company’s entire value proposition changes, says Jeanne Ross, principal research scientist at the Center for Information Systems Research at the Massachusetts Institute of Technology (MIT). “It either already has or it’s going to, because digital technologies make things possible that weren’t possible before,” she explains.

2. Work in Diverse Teams

When it comes to large projects, CIOs have always needed input from a diverse collection of businesspeople to be successful. The best have developed ways to convince and cajole reluctant participants to come to the table. They seek out technology enthusiasts in the business and those who are respected by their peers to help build passion and commitment among the halfhearted.

Digital transformation amps up the urgency for building diverse teams even further. “A small, focused group simply won’t have the same breadth of perspective as a team that includes a salesperson and a service person and a development person, as well as an IT person,” says Ross.

At Lenovo, the global technology giant, many of these cross-functional teams become so used to working together that it’s hard to tell where each member originally belonged: “You can’t tell who is business or IT; you can’t tell who is product, IT, or design,” says the company’s CIO, Arthur Hu.

One interesting corollary of this trend toward broader teamwork is that talent is a priority among digital leaders: they spend more on training their employees and partners than ordinary companies, as well as on hiring the people they need, according to the SAP-Oxford Economics survey. They’re also already being rewarded for their faith in their teams: 71% of leaders say that their successful digital transformation has made it easier for them to attract and retain talent, and 64% say that their employees are now more engaged than they were before the transformation.

3. Become a Consultant

Good CIOs have long needed to be internal consultants to the business. Ever since technology moved out of the glasshouse and onto employees’ desks, CIOs have not only needed a deep understanding of the goals of a given project but also to make sure that the project didn’t stray from those goals, even after the businesspeople who had ordered the project went back to their day jobs. “Businesspeople didn’t really need to get into the details of what IT was really doing,” recalls Ferro. “They just had a set of demands and said, ‘Hey, IT, go do that.’”

Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants.

But that was then. Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants. “If you’re building a house, you don’t just disappear for six months and come back and go, ‘Oh, it looks pretty good,’” says Ferro. “You’re on that work site constantly and all of a sudden you’re looking at something, going, ‘Well, that looked really good on the blueprint, not sure it makes sense in reality. Let’s move that over six feet.’ Or, ‘I don’t know if I like that anymore.’ It’s really not much different in application development or for IT or technical projects, where on paper it looked really good and three weeks in, in that second sprint, you’re going, ‘Oh, now that I look at it, that’s really stupid.’”

4. Learn Horizontal Leadership

CIOs have always needed the ability to educate and influence other leaders that they don’t directly control. For major IT projects to be successful, they need other leaders to contribute budget, time, and resources from multiple areas of the business.

It’s a kind of horizontal leadership that will become critical for businesspeople to acquire in digital transformation. “The leadership role becomes one much more of coaching others across the organization—encouraging people to be creative, making sure everybody knows how to use data well,” Ross says.

In this team-based environment, having all the answers becomes less important. “It used to be that the best business executives and leaders had the best answers. Today that is no longer the case,” observes Gary Cokins, a technology consultant who focuses on analytics-based performance management. “Increasingly, it’s the executives and leaders who ask the best questions. There is too much volatility and uncertainty for them to rely on their intuition or past experiences.”

Many experts expect this trend to continue as the confluence of automation and data keeps chipping away at the organizational pyramid. “Hierarchical, command-and-control leadership will become obsolete,” says Edward Hess, professor of business administration and Batten executive-in-residence at the Darden School of Business at the University of Virginia. “Flatter, distributive leadership via teams will become the dominant structure.”

5. Understand Process Design

When business processes were simpler, IT could analyze the process and improve it without input from the business. But today many processes are triggered on the fly by the customer, making a seamless customer experience more difficult to build without the benefit of a larger, multifunctional team. In a highly digitalized organization like Amazon, which releases thousands of new software programs each year, IT can no longer do it all.

While businesspeople aren’t expected to start coding, their involvement in process design is crucial. One of the techniques that many organizations have adopted to help IT and businesspeople visualize business processes together is design thinking (for more on design thinking techniques, see “A Cult of Creation“).

Customers aren’t the only ones who benefit from better processes. Among the 100 companies the SAP-Oxford Economics researchers have identified as digital leaders, two-thirds say that they are making their employees’ lives easier by eliminating process roadblocks that interfere with their ability to do their jobs. Ninety percent of leaders surveyed expect to see value from these projects in the next two years alone.

6. Learn to Keep Learning

The ability to learn and keep learning has been a part of IT from the start. Since the first mainframes in the 1950s, technologists have understood that they need to keep reinventing themselves and their skills to adapt to the changes around them.

Now that’s starting to become part of other job descriptions too. Many companies are investing in teaching their employees new digital skills. One South American auto products company, for example, has created a custom-education institute that trained 20,000 employees and partner-employees in 2016. In addition to training current staff, many leading digital companies are also hiring new employees and creating new roles, such as a chief robotics officer, to support their digital transformation efforts.

Nicolas van Zeebroeck, professor of information systems and digital business innovation at the Solvay Brussels School of Economics and Management at the Free University of Brussels, says that he expects the ability to learn quickly will remain crucial. “If I had to think of one critical skill,” he explains, “I would have to say it’s the ability to learn and keep learning—the ability to challenge the status quo and question what you take for granted.”

7. Fail Smarter

Traditionally, CIOs tended to be good at thinking through tests that would allow the company to experiment with new technology without risking the entire network.

This is another unfamiliar skill that smart managers are trying to pick up. “There’s a lot of trial and error in the best companies right now,” notes MIT’s Ross. But there’s a catch, she adds. “Most companies aren’t designed for trial and error—they’re trying to avoid an error,” she says.

To learn how to do it better, take your lead from IT, where many people have already learned to work in small, innovative teams that use agile development principles, advises Ross.

For example, business managers must learn how to think in terms of a minimum viable product: build a simple version of what you have in mind, test it, and if it works start building. You don’t build the whole thing at once anymore.… It’s really important to build things incrementally,” Ross says.

Flexibility and the ability to capitalize on accidental discoveries during experimentation are more important than having a concrete project plan, says Ross. At Spotify, the music service, and CarMax, the used-car retailer, change is driven not from the center but from small teams that have developed something new. “The thing you have to get comfortable with is not having the formalized plan that we would have traditionally relied on, because as soon as you insist on that, you limit your ability to keep learning,” Ross warns.

8. Understand the True Cost—and Speed—of Data

Gut instincts have never had much to do with being a CIO; now they should have less to do with being an ordinary manager as well, as data becomes more important.

As part of that calculation, businesspeople must have the ability to analyze the value of the data that they seek. “You’ll need to apply a pinch of knowledge salt to your data,” advises Solvay’s van Zeebroeck. “What really matters is the ability not just to tap into data but to see what is behind the data. Is it a fair representation? Is it impartial?”

Increasingly, businesspeople will need to do their analysis in real time, just as CIOs have always had to manage live systems and processes. Moving toward real-time reports and away from paper-based decisions increases accuracy and effectiveness—and leaves less time for long meetings and PowerPoint presentations (let us all rejoice).

Not Every CIO Is Ready

Of course, not all CIOs are ready for these changes. Just as high school has a lot of false positives—genius nerds who turn out to be merely nearsighted—so there are many CIOs who aren’t good role models for transformation.

Success as a CIO these days requires more than delivering near-perfect uptime, says Lenovo’s Hu. You need to be able to understand the business as well. Some CIOs simply don’t have all the business skills that are needed to succeed in the transformation. Others lack the internal clout: a 2016 KPMG study found that only 34% of CIOs report directly to the CEO.

This lack of a strategic perspective is holding back digital transformation at many organizations. They approach digital transformation as a cool, one-off project: we’re going to put this new mobile app in place and we’re done. But that’s not a systematic approach; it’s an island of innovation that doesn’t join up with the other islands of innovation. In the longer term, this kind of development creates more problems than it fixes.

Such organizations are not building in the capacity for change; they’re trying to get away with just doing it once rather than thinking about how they’re going to use digitalization as a means to constantly experiment and become a better company over the long term.

As a result, in some companies, the most interesting tech developments are happening despite IT, not because of it. “There’s an alarming digital divide within many companies. Marketers are developing nimble software to give customers an engaging, personalized experience, while IT departments remain focused on the legacy infrastructure. The front and back ends aren’t working together, resulting in appealing web sites and apps that don’t quite deliver,” writes George Colony, founder, chairman, and CEO of Forrester Research, in the MIT Sloan Management Review.

Thanks to cloud computing and easier development tools, many departments are developing on their own, without IT’s support. These days, anybody with a credit card can do it.

Traditionally, IT departments looked askance at these kinds of do-it-yourself shadow IT programs, but that’s changing. Ferro, for one, says that it’s better to look at those teams not as rogue groups but as people who are trying to help. “It’s less about ‘Hey, something’s escaped,’ and more about ‘No, we just actually grew our capacity and grew our ability to innovate,’” he explains.

“I don’t like the term ‘shadow IT,’” agrees Lenovo’s Hu. “I think it’s an artifact of a very traditional CIO team. If you think of it as shadow IT, you’re out of step with reality,” he says.

The reality today is that a company needs both a strong IT department and strong digital capacities outside its IT department. If the relationship is good, the CIO and IT become valuable allies in helping businesspeople add digital capabilities without disrupting or duplicating existing IT infrastructure.

If a company already has strong digital capacities, it should be able to move forward quickly, according to Ross. But many companies are still playing catch-up and aren’t even ready to begin transforming, as the SAP-Oxford Economics survey shows.

For enterprises where business and IT are unable to get their collective act together, Ross predicts that the next few years will be rough. “I think these companies ought to panic,” she says. D!


About the Authors

Thomas Saueressig is Chief Information Officer at SAP.

Timo Elliott is an Innovation Evangelist at SAP.

Sam Yen is Chief Design Officer at SAP and Managing Director of SAP Labs.

Bennett Voyles is a Berlin-based business writer.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.
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CEO Priorities And Challenges In The Digital World

Dr. Chakib Bouhdary

Digital transformation is here, and it is moving fast. Companies are starting to realize the enormous power of digital technologies like artificial intelligence (AI), Internet of things (IoT) and blockchain. These technologies will drive massive opportunities—and threats—for every company, and they will impact all aspects of business, including the business model. In fact, business velocity has never been this fast, yet it will never be this slow again.

To move quickly, companies need to be clear on what they want to achieve through digital transformation and understand the possible roadblocks. Based on my meetings with customer executives across regions and industries, I have learned that CEOs often have the same three priorities and face the same three challenges:

1. Customer experience – No longer defined by omnichannel and personalized marketing.

Not surprisingly, 92 percent of digital leaders focus on customer experience. However, this is no longer just about omnichannel and personalized marketing – it is about the total customer experience. Businesses are realizing that they need to reimagine their value proposition and orchestrate changes across the value chain – from the first point of interaction to manufacturing, to shipment, to service – and be able to deliver the total customer experience. In some cases, it will even be necessary to change the core product or service itself.

2. Step change in productivity – Transform productivity and cost structure through digital technologies.

Businesses have been using technology to achieve growth for decades, but by combining emerging technologies, they can now achieve a significant productivity boost and reduce costs. For this to happen, companies must first identify the scenarios that will drive significant change in productivity, prioritize them based on value, and then determine the right technologies and solutions. Both Mckinsey and Boston Consulting Group expect a 15 to 30 percent improvement in productivity through digital advancements – blowing the doors off business-as-usual and its incremental productivity growth of 1 to 2 percent.

3. Employee engagement – Fostering a culture of innovation should be at the core of any business.

Companies are looking to create an environment that encourages creativity and innovation. Leaders are attracting the needed talent and building the right skill sets. Additionally, they aim for ways to attract a diverse workforce, improve collaborations, and empower employees – because engaged employees are crucial in order to achieve the best results. This Gallup study reveals that approximately 85 percent of employees worldwide are performing below their potential due to engagement issues.

As CEOs work towards achieving these three desired outcomes, they face some critical challenges that they must address. I define the top three challenges as follows: run vs. innovate, corporate cholesterol, and digital transformation roadmap.

1. Run vs. innovate – To be successful you must prioritize the future.

The foremost challenge that CEOs are facing is how they can keep running current profitable businesses while investing in future innovations. Quite often these two conflict as most executives mistakenly prioritize the first and spend much less time on the latter. This must change. CEOs and their management teams need to spend more time thinking about what digital is for them, discuss new ideas, and reimagine the future. According to Gartner, approximately 50 percent of boards are pushing their CEOs to make progress on digital. Although this is a promising sign, digital must become a priority on every CEOs agenda.

2. Corporate cholesterol – Do not let company culture get in the way of change.

The older the company is, the more stuck it likely is with policies, procedures, layers of management, and risk averseness. When a company’s own processes get in the way of change, that is what I call “corporate cholesterol.” CEOs need to change the culture, encourage cross-team collaborations, and bring in more diverse thinking to reduce the cholesterol levels. In fact, both Mckinsey and Capgemini conclude that culture is the number-one obstacle to digital effectiveness.

3. Digital transformation roadmap – Digital transformation is a journey without a destination.

Many CEOs struggle with their digital roadmap. Questions like: Where do I start? Can a CDO or another executive run this innovation for me? What is my three- to five-year roadmap? often come up during the conversations. Most companies think that there is a set roadmap, or a silver bullet, for digital transformation, but that is not the case. Digital transformation is a journey without a destination, and each company must start small, acquire the necessary skills and knowledge, and continue to innovate.

It is time to face the digital reality and make it a priority. According to KPMG, 70 percent to 80 percent of CEOs believe that the next three years are more critical for their company than the last fifty. And there is good reason to worry, as 75 percent of S&P 500 companies from 2012 will be replaced by 2027 at the current disruption rate.

Download this short executive document. 

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Dr. Chakib Bouhdary

About Dr. Chakib Bouhdary

Dr. Chakib Bouhdary is the Digital Transformation Officer at SAP. Chakib spearheads thought leadership for the SAP digital strategy and advises on the SAP business model, having led its transformation in 2010. He also engages with strategic customers and prospects on digital strategy and chairs Executive Digital Exchange (EDX), which is a global community of digital innovation leaders. Follow Chakib on LinkedIn and Twitter