How Legacy Can Overcome Digital Transformation Challenges
Today, most organizations understand and appreciate the need to provide digital experience to a new and growing breed of digital natives who live and breathe digital. But despite the intent, transforming an organization, especially from a traditional old school ‘legacy’ industry, can be incredibly difficult.
Insurance is a great example. The insurance industry is highly regulated, and with good reasons. Stringent regulations can make it tough when you are trying to launch, let’s say, a new life insurance product that is simple and easy to understand. No matter how innovative and exciting the new offering is, it needs to stay within the ambit of rigorous guidelines and regulations. This puts severe limitations on creativity and innovation in certain markets.
Technology transformation is the other roadblock. You are essentially trying to retro fit the legacy technology backbone with new-age technology. Not an easy task. If we again take life insurance as an example, many companies run on antiquated COBOL-based systems that run in a batch mode. Every night, the system runs batch jobs to process all the policies sold or changed during that day. This is about as far as one can be from a real-time, one-touch experience that today’s customers know and demand. In such a situation, creating a world-class experience is challenging because the technology stack is living in an era that doesn’t allow us to do so readily.
The other aspect is that the industry itself is steeped in operational processes that are not designed to be nimble enough to support today’s business needs. For example, the processes required to support issuance or changes to policy would have changed several times over, across the years, in lieu of changing regulations or types of products. Often for many companies this means completely overhauling the business process to make digital experience as real as possible, which throws a big challenge in their transformation journey.
Any digital transformation effort in such a scenario demands an all-encompassing change across technology, process and functions in order to beat challenges and become successful. It is a massive exercise right from realignment of roles, redefinition of both internal and customer facing processes, to the complete technology overhaul. So, even if an organization is keen and willing, moving the entire business into a new era is a tedious, time-consuming and difficult task.
The question then is; how do we do this?
Start Small and Experiment
Given the quantum of change that a transformation demands, many organizations are wary of jumping headlong into it. This is especially because you run the risk of impacting growth, if you mess it up. So, the preferred approach to digital transformation is to experiment with smaller pockets of change. One way, which is probably extreme but possible is to create a separate entity that is completely digital in terms of processes, technology stack, and offerings. This is being experimented by industries who understand that changing the old legacy firm quickly to create a new digital face is near impossible. So creating a separate entity that is different in every way, from structure to roles, compensation, process and tech stack, thereby keeping it away from the shadow of the legacy organization is an alternate way forward. It is truly the turning point for legacy industries that they either disrupt themselves or be disrupted.
A leading global staffing solutions provider, has done this quite successfully. It launched a mobile-first, cloud-based, end-to end digital platform in many ways disrupting their existing business. The new platform leverages the company’s key strengths, and also brings scale, speed and agility to introduce new ways of doing business in the digital economy. It is already disrupting the industry and its own business in several markets.
A Phased-Approach to Digital Transformation
If we hope to digitally transform an entire organization without unduly disrupting the flow of work on a day-to-day basis, a phased approach probably works best. Start with the people. The challenge is that people are set in their ways. So, an organizational change management exercise that focuses on changing people’s mindset and thinking is an important part of the change. I have been part of conversations where people would ask what we meant by going digital. Not everyone understands or agrees to what it means, so creating a common understanding of what digital means for an organization is a great way to start.
The next thing is to agree on what are the outcomes that the organization is trying to achieve. This probably is the most important step that organizations miss in the journey. Going digital is strategic enough for it to be run from the highest level. Agreeing to outcomes that must be achieved, whether it is Net Promoter Score (NPS) or top-line/bottom-line growth, ensures alignment of the priorities within the program.
The subsequent step is to re-look at processes to ensure that they meet the desired outcomes. For example, if NPS is important then one of the critical things would be driving customer satisfaction. Every process that touches the customer, needs to be relooked at and examined to see what should change so that you exceed the customer expectation.
A pilot should be launched first to assess feedback. The actual digital applications could be introduced through a series of soft launches over a period of time. It is essential to invest sufficient time and resources to gain a thorough understanding of what your customers expect.
One stellar digital success story is that of a US-based agriculture and home improvement product. While they always have had an online channel it wasn’t quite best in class and not delivering the expected business impact. On a detailed study there were many possible reasons that were identified like their customers often liked to pick up products at the stores, or there were issues of running out of stock which became apparent only at the time of checkout etc. Multiple such insights on the portal side and on the process side went in to creating the digital transformation plan. Marrying online and in-store experience, process changes, and redoing the online channel for better efficiencies led to a remarkable turnaround in their online sales to the tune of an almost 100% increase during Thanksgiving.
Today, there exists a class of digital native customers who expect the best digital experience in their interaction with any business. At the same time, there is also a class of what we can call ‘legacy’ customers who prefer the traditional modes of engagement. Every industry has to cater to both the types of customers, so that when they access your business through different channels their expectations on experience are fairly aligned. Whether a legacy customer is walking in to the physical store or a digital native customer is accessing the digital store they expect the same brand characteristics along with a much higher level of responsiveness and personalization than in the past. And then both these set of customers are coming from a world of one-click buy, so today’s businesses have to apply the same set of technologies and create similar experiences to meet the demands of both the groups.
With the advent of conversational commerce, AI, Bots, AR/VR/MR etc., this space of digital transformation is just getting more exciting.