In the 20 years since the emergence of the commercial Internet, businesses have dramatically changed their approach to how they serve customers and make money. But while the Web has introduced many large-scale changes, the broader transition to digital society is still in its early days. In fact, the most important digital innovations — systems that think and learn, for example — are still ahead of us.
But beyond digitizing products, services and processes, we believe the winners of the next digital economy will combine an understanding of human behavior with expertise in digital technologies. To truly understand people, decision-makers must tap into the world of the humanities and social sciences to observe customers and draw heavily on the insights captured through behavioral analytics. Successful businesses will build teams and organizations that embrace both behavioral and technology acumen. In short, to become more digital, businesses must first become more human.
Getting People Right
Far too often, we’ve seen companies get derailed by focusing on technology innovation for its own sake rather than prioritizing customer needs. In these businesses, CIOs tend to offer up an á la carte menu of possible digital solutions rather than working to understand, embrace and communicate the difference that digital can make in consumers’ lives.
Businesses across industries need to question entrenched assumptions and get curious about the motivations behind actual customer behavior. Automakers, for example, should think about why people drive, beyond getting from point A to point B, and then design for those experiences. Educational companies should study why people want or need to learn, how they access information and what support structures work best for them. Fitness businesses should ponder the role exercise plays for contemporary consumers and how they can offer something uniquely valuable in that context.
To do this, businesses must learn how customers really live by spending extended periods of time with them and using the tools of sociology, anthropology and philosophy to observe and understand their interactions. ReD Associates (a strategic consulting firm specializing in the use of social science tools with whom we partner) recently conducted a study for a supermarket chain that illustrates this approach.
To ensure the success of its digital transformation initiative, the grocery chain wanted to first understand the role shopping for dinner really plays in people’s lives. After watching how groups of customers shopped, planned and made dinner with their families, ReD’s social scientists made some interesting discoveries. Not only did they find fewer families sharing a common mealtime, but family members’ dietary needs also resulted in their eating different foods from each other. As a result, time-constrained shoppers were motivated more by speed and convenience than discounts or loyalty.
Shoppers also categorized grocery stores in a surprising way – they were more apt to consider the experience the store exuded (fresh and local vs. practical and thrifty, for instance) than the common groupings of “discount” or “premium.” As a result of the findings, it was clear the supermarket chain needed to reconsider its vision and fundamentally update its value proposition before embarking on a digital transformation.
Getting Technology Right
With a clear, customer-centric purpose in place (think self-empowerment autonomy), powerful ideas will emerge for digital innovations that can thrive in the marketplace. The key lies in “being” vs. merely “doing” digital. “Doing” digital means launching a series of discrete initiatives – an app to engage customers or an optimized process to cut costs – without thinking about how these initiatives will fit together, significantly change the business or jointly add value for customers.
“Being” digital, on the other hand, means thinking digital first and taking a company-wide approach to transformation. It means having a common language for digital across the organization and a shared understanding of the goal of transformation. It also means driving digital transformation through a single, cross-functional task force.
Companies that are truly digital typically embrace the following five critical components (first identified in our book Code Halos: How the Digital Lives of People, Things and Organizations Are Changing the Rules of Business):
The capture and use of consumer information, including user location data, spending history, social media behavior and device usage.
The systems that generate, collect and manage the data, including smartphones, modems and cloud servers.
The interactions and relationships between devices, solutions, users, apps, websites, etc.
The software that ascribes meaning and value to the data, including the code that automates recommendations and personalized offers.
The benefits to the business of the ascribed meaning and value, including revenue, margins, penetration and brand metrics.
The difference between doing and being digital will have enormous consequences for how executives run their organizations. While one drives a culture of digitization, the other influences a culture of risk aversion.
Getting the Interplay Right
We advise organizations to follow three principles to work toward digital success:
- End-to-end collaboration across disciplines. With each handoff from social scientists to data scientists to software engineers, there is a risk of losing clear direction. Even at the early stages of understanding consumers, organizations should strive to develop an understanding of the business and technological context.
- Non-linear processes. Successful innovation is the result of continuously revisited insights, design and implementation. A clear customer value proposition should never be thought of as final; insights, design and implementation should be continuously revisited and refined.
- A consistent (if not consensus) strategy. The teams embarking on this journey will number in the thousands. Beware: Team divisions can quickly lead to silos that challenge the optimization of individual pieces of the strategy at the expense of the whole.
For companies born before the digital era, the transition to being digital is often much more complicated than for digital natives. For these companies, executives must resist the temptation to simply do digital. To do this, they need to replace customer assumptions with real knowledge of human behavior through actual observation and then use those insights to formulate their digital strategy. The journey to digital success begins with a true understanding of what it means to be human.
To learn more, read Being Digital Means Being More Human or visit our Digital Works Practice.
This article was co-written by Lester Lam, a Vice-President and Global Leader for Cognizant Digital Works Strategy Consulting, and Andreas W. Hansen a partner with ReD Associates. It is a byproduct of a strategic partnership between the two companies under which strategy experts, behavioral economists, anthropologists, sociologists and ethnographers from ReD Associates work with digital strategists, designers, technologists and data scientists from Cognizant Digital WorksTM to help businesses connect more closely to real-world consumer behaviors and experiences. The co-authors can be reached at firstname.lastname@example.org and Lester@cognizant.com, respectively.