Digitalization and the Digital Path to Purchase

Stephen DeAngelis

August 21, 2014

Kelsey Jones (@wonderwall7) reports that a recent study released by the Altimeter Group, The State of Digital Transformation, “discusses the phenomenon of ‘digital transformation’ and what it means to the online business and marketing industry. Among its findings, the report stated 88 percent of individuals participating in the survey claimed their organization was undergoing a digital transformation.” [“88% of Organizations Are Undergoing a ‘Digital Transformation,’ According to Study by Brian Solis of Altimeter Group,” Search Engine Journal, 21 July 2014] You might be asking yourself, “What is digitalization and what does digital transformation involve?” Fortunately, Altimeter offers a simple definition:

“Digital transformation [is] a movement under a customer-centric lens: The realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle.”

I think that definition should be expanded. Digitalization involves both customer-facing applications of digital technology as well as supply-side applications. In other words, digitalization is an end-to-end process that ensures organizations are getting the most from their data. McKinsey & Company analysts, Tunde Olanrewaju, Kate Smaje, and Paul Willmott, declare, “The age of experimentation with digital is over. In an often bleak landscape of slow economic recovery, digital continues to show healthy growth.” [“The seven traits of effective digital enterprises,” Telecom, Media, & High Tech Extranet, 30 July 2014 (registration required)] Specifically, they note, “E-commerce is growing at double-digit rates in the United States and most European countries, and it is booming across Asia.” In other words, the digital path to purchase band wagon has become a high speed train. Companies that fail to digitalize soon are likely to be left at the station as the eCommerce train speeds by. Digitalizing an organization might be necessary, but it isn’t easy. The five top challenges to digital transformation identified in the Altimeter survey clearly make that point. The top challenge identified by survey participants was changing corporate culture. Change is always difficult. In his famous book The Prince, Niccolo Machiavelli wrote about how difficult it is to change an existing organization and why one must expect to put his career on the line to effect change. He wrote:

“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.”

The second challenge identified by participants in the Altimeter survey related to marketing (namely, “thinking beyond a ‘campaign mentality’ in digital strategy efforts). In the “always on” world of eCommerce, somebody somewhere is always offering a deal. The pace of marketing has increased to the point where it is approaching real-time. That means that traditional decision cycles for campaign planning are becoming obsolete. To underscore that point, Tom Schuster, CEO of Searchmetrics, points out that Chief Marketing Officers (CMOs) are rapidly becoming more involved in IT systems than CIOs. He reports, “IT industry analyst, Gartner, predicts CMOs will spend more on IT than CIOs by 2017. This is being driven by the rise of areas such as digital and social media, as well as the onset of an era of Big Data, and reflects the fact that the CMO has an increasing technology responsibility in today’s digital world. [“Big data – why breaking down the silos between marketing and IT is essential,” Fourth Source, 14 July 2014] Schuster’s headline says it all. Companies must break down information silos in order to compete in today’s business environment. That also happens to be the third challenge to digital transformation identified by participants in the Altimeter survey (i.e., “cooperation between departments and team silos”).

 

Schuster insists, “Big Data initiatives require a mix of skills and knowledge to deliver success. Despite their long-standing rivalry the CIO and CMO need to work together, and pool their talents, if Big Data is going to deliver Big Profits.” That notion holds true for rivalries between all traditional organizational departments. To achieve this, Schuster makes five recommendations:

 

1. Agree on goals
2. Communicate beyond silos
3. Understand each other’s language
4. Bring skill sets together
5. Walk before you run

 

Concerning his last point, Schuster writes, “Start with pilot projects which allow you to learn how to work together, develop best practice quickly and even fail without the consequences being too catastrophic. Once the relationship and expertise has developed, you can move onto more significant Big Data projects with a much greater chance of success.” When my company, Enterra Solutions®, approaches a new client, we generally recommend starting with a pilot or proof of concept project. This approach ensures that clients make the best use of their resources. According to participants in the Altimeter survey, resources (people, technologies, and expertise) are one of the challenges that must be addressed during digital transformation along with budget allocation.

 

The fifth challenge they identified was “understanding [the] behavior or impact of new connected customers.” Barbara Venneman, a principal at Deloitte Consulting LLP, agrees that understanding customers is essential. In the following video, she explains how digital engagement is reshaping the business landscape.

 

 

Although Venneman singles out the CIO as the key individual in leading digital transformation, she makes the point that the CIO must work with others to achieve success. The article in which Venneman’s video was embedded stated, “The high bar for personalized digital engagement makes the maxim ‘know thy customer’ more relevant than ever. A customer’s perception of a brand could largely depend on how well the company reaches this bar by making relevant content available across digital and physical channels. As the stakes increase, so do the complexities of managing digital rights, content, and access.” [“Navigating the New World of Digital Engagement,” The Wall Street Journal, 24 July 2014] The following Baynote infographic about “Data’s Role in the Online Path to Purchase” provides a good overview of the complexity of this commerce channel. The infographic, however, could lead one to believe that a customer’s digital path to purchase is linear. It’s not. Customers can jump on off the path at any time. And more often than not, the digital path leads to an in-store purchase.

 

 

Altimeter’s Brian Solis (@briansolis) told Jones, ““Digital transformation starts with seeing the digital customer journey for what it is today and what it could be. Live your brand the way your customers do. Then invest in new technology, models and processes that unite the customer experience instead of fragmenting it. Customers only see one brand … not departments or silos.” Like most other things in life that are worth doing, digital transformation takes planning, hard work, and follow-through. Enhancing a customer’s digital path to purchase is a journey in itself.