Written by: Cynthia A. Conway and Mitch Codkind
c.2021 Harvard Business School Publishing Corp.
Digital transformation is a hot topic, but most leaders don’t understand the full scope of what it means. At a recent class in Drexel University’s Executive MBA program, one of Microsoft’s highly respected technology executives and global C-suite advisers, April Walker, presented this definition: “Digital transformation is not just ‘doing digital.’ Digital transformation is a deliberate, strategic repositioning of one’s business in today’s digital economy.”
The current economic environment threatens the success — and perhaps even the survival — of many small and mid-size companies, because larger organizations are increasingly able to provide personalized experiences to their customers, in literally any way their customers choose.
Most leaders of these smaller companies have already made significant digital investments to support their businesses operationally. They may have implemented technologies across a broad spectrum of business functions, like HR, governance and cybersecurity, customer relationship management (CRM), enterprise resource planning (ERP), and finance and risk, but stopped short of investing in AI or predictive analytics. But even as teams continue to work hard to harness all the data being generated by these technologies, it still takes longer than it should to get answers to basic KPI questions that are critical to running the business, such as those around customer churn, retention and satisfaction rates, employee satisfaction and turnover, average deal size, or billings by key products and services. Even more frustrating is that, when the reports are finally delivered, they lack insights into why the changes are occurring.
What digital strategies are most small and mid-size businesses missing? The answer is twofold: understanding that you need specialized business analytics expertise on your leadership team and that you need to change how your organization makes decisions.
Hire A Data Scientist And Implement A Data-Driven Decision-Making Culture
An April 2020 Oxford Economics study uncovered a sense of unpreparedness among 2,000 small and mid-size businesses surveyed across 19 countries. Approximately half of participants reported that the pandemic had brought with it a series of operational disruptions and market volatility that has challenged their ability to serve customers reliably, engage employees authentically and build trust with their partners. More revealing was how they viewed their access to data-driven insights to support their goals and digital transformation efforts. Fewer than 40% said they have all the data needed to support analytics-based decision making. Gaps in data collection and analysis hinder small and mid-size businesses’ ability to offer customers personalized connections. As a result, 67% of those surveyed said this data deficit is giving larger organizations a stronger competitive advantage due to the more sophisticated analytics capabilities they have in place.
In today’s digital world, where customer, operating and financial data is being collected at an exponential rate, you need the specialized expertise of a data scientist to help develop a business intelligence strategy that can meet your goals, boost profitability and drive success. First, they will make sure your data is in good enough shape to accelerate problem solving and business growth. From there, they will develop a technology architectural plan that will outline how to store your company’s data, most likely in a highly scalable, cost-effective and secure cloud environment like AWS or Azure.
The plan will also include technology solutions to ensure you meet your corporate governance requirements, and it will enable a full range of analytical capabilities that connect and share information across all functions of your organization. It will also include a data visualization layer, which will allow you to see your prioritized performance metrics quickly and easily, accelerating your organization’s decision making process into real or near-real time.
With all this in place, you, your data scientist and their peers will develop processes across your organization to foster a data-driven decision-making culture for a customer-centric organization — without bias. They’ll ensure you’re working with just the right data based on measurable goals or KPIs and have the ability to understand trends, seek out opportunities and identify issues before they become barriers to profitability. They’ll also analyze patterns and utilize them to develop strategies and activities that benefit the business.
While you may not be entirely on board with AI and predictive analytics, small and mid-size companies should aim to adopt these tools over the coming years — especially as many competitors begin to personalize customer interactions using AI-driven software and chatbots and increase efficiency with robotic process automation. Specifically, supply chain leaders across many industries are using these technologies to power their strategically repositioned, customer-centric organizations. By going above and beyond conventional approaches of doing business, leaders are able to consistently deliver more resilient supply chains, higher levels of innovation, increases in customer and employee satisfaction and improvements to overall efficiencies and financial growth.
Transform Your C-Suite Into A Group Of Digital Leaders
The primary goal of having a strategic data scientist on your leadership team (known as a chief data officer in larger companies) is to improve the value you’re getting from data and analytic investments. They will be successful if they treat data and analytics as an asset, create business value, increase data sharing and ensure that your organization’s decision making is data driven. For those things to actually happen, your entire leadership team must align with and support them and play an active role in ensuring their success. Throughout the process, each team member will also learn how to be an analytics-enabled digital leader.
Is your organization made up of leaders with analog expertise who are generally product focused, driven by profits and constantly aware of external forces — especially from their competitors? In contrast, do you have leaders with digital expertise who are customer focused, driven by delivering value through technology and constantly looking for strategic business partnerships to grow their ecosystem? Or do you have an ambidextrous leadership team, which is a hybrid of both? By creating a culture of ambidexterity within your leadership team, you’ll be able to remain competitive in your current core markets while also winning in new domains. A leadership team comprising both areas of expertise is ideal.
For generations, small and mid-size businesses have enjoyed a distinct competitive advantage of strong, loyal relationships with their customers. This bond was forged by consistent and continuous levels of personalized service and experience. These relationships generated meaningful insights or business intelligence that allowed companies to continuously improve, add value and stay ahead of their competition. Another distinct competitive advantage was the ability to make and implement strategic decisions at a speed their larger competitors could never hope to replicate.
Now more than ever, it’s important to recognize that your digital competitors, who are using speed as their competitive advantage, are disrupters by nature. If you wait to be disrupted, it could be the end of your business. To avoid this all-too-common pitfall and ensure sustainable success, do not wait. Be deliberate about not delegating. Take ownership to transform your organization now — before someone else does it for you.
