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89% of consumers switch to a competitor after a poor CX

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89% of consumers switch to a competitor following a poor customer experience, according to an Oracle study. But how can you use digital technology to improve your customers' experience?

Uncover how several prominent businesses embraced digital technologies to retain customers and increase profits. For example, Domino's Pizza had a 23% growth in profit after it allowed customers to track their deliveries online.

Discover the 4 factors that can make a digital transformation project profitable and worthwhile.

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89% of consumers switch to a competitor after a poor CX

  1. 1. WHITE PAPER How enterprise architecture will successfully help you plan your digital transformation  mega.com
  2. 2. SUMMARY I. Challenges of digital transformation II. With digital transformation, customer experience is king III. Establishing the right conditions for a successful transformation IV. Laying the groundwork for a smooth transformation V. Solutions to guide your transformation 2
  3. 3. Four letters – SMAC, which stand for Social, Mobile, Analytics, and Cloud – are behind one of most significant trends affecting businesses today: digital transformation. This digital revolution has profoundly affected both consumer behavior and customer relationships, in almost every industry. Today’s consumers are increasingly mobile: • The number of unique mobile subscribers reached 3.6 billion at the end of 2014 – nearly half of the global population.1 • By the end of 2015, a billion of those people will have used their mobile device for banking services – a figure that should reach 2 billion by 2020.2 • By 2017, mobile commerce revenue in the U.S. [will be] 50% of U.S. digital commerce revenue3 …and connected: • In August 2015, Facebook – the world’s biggest social network by number of users – had nearly 1.5 billion active user profiles.4 • Analysts estimate that by 2016, there will be 2.13 billion social network users worldwide.5 • 1 million new active mobile social users are added every day. That’s 12 each second.6 Meanwhile,businessesareusingnewtechnologiestocollectbigdatatoanalyzeconsumerbehaviors and better meet customer needs … and every day, more businesses are jumping on the bandwagon: • A Gartner study published in September 2015 showed that 75% of companies surveyed have invested or plan to invest in big data in the next two years. • Another study carried out globally revealed that over 40% of companies surveyed have already implemented a big data project, and only 17% don’t plan to at all.7 Why all the hype around digital transformation? Many businesses have mandated that operations be moved to the cloud. This number grows every day. The software-as-a- service market reached $49 billion in 2015 (source: TBR), and the infrastructure-as-a-service market reached $27 billion. The pace of innovation is clearly accelerating in this digital age, and new technology is continuously hitting the market. Some of this new technology is already making waves, like the Internet of Things (IoT). An IDC study published in September 2015 found that 73% of respondents have already deployed such devices or plan to do so in the coming year. Other technology, such as 3D printing and drones, are already helping companies to innovate. 1 “The Mobile Economy 2015,” GSMA 2 Juniper Research study 3 Gartner 4 Statista 5 Statista 6 Brandwatch 7 “ Big Data Use Cases 2015,” BARC study sponsored in part by cloudera 3
  4. 4. By prompting a rapid change in consumer behavior, digital technology is upending “conventional” business models across the board. Entire segments of the economy are being transformed as new markets emerge, reflected in the success of Amazon, Netflix, Uber, and Airbnb. Some industries have been completely disrupted, such as music and media. Others, like hospitality, retail, and transportation, are facing an entirely new form of competition. Traditional industries like manufacturing, healthcare, banking, and insurance are aggressively leveraging SMAC to change business models, including supply chain and customer management. And no industry will remain unscathed; they must all rethink their processes and revamp their services to keep up with the digital age. Such a shift makes good business sense, too. A recent Dell study showed that “organizations actively using big data, cloud, and mobility enjoy up to 53% higher revenue growth than those that have not invested in these technologies.”8 Itwouldbetooeasytosaythatthesecompaniesaresuccessful simply because they have installed the latest technology. Their success also comes from applying that technology in a way that delivers solid benefits to their customers. They have put customers and, more broadly, consumers – who have increasing influence on the technologies that businesses adopt – at the heart of their business models. High customer expectations In the digital age, understanding customers, their needs, and expectations – and using that knowledge to deliver an impeccable customer experience – is more essential than ever. Today’s consumers have little patience for even the slightest inconvenience: a service that’s complicated to use, a slow website, an outdated catalog, nonexistent customer support, or the inability to track a delivery are all things that could cause someone to take their business elsewhere. And most of those people don’t come back. An Oracle study found that 89% of consumers began doing business with a competitor following a poor customer experience.9 8 Global Technology Adoption Index 2015, Dell 9 2011 Customer Experience Impact Report, Oracle “Organizations actively using big data, cloud, and mobility enjoy up to 53% higher revenue growth than those that have not invested in these technologies.8 I - Challenges of digital transformation 4
  5. 5. All successful online retailers have one thing in common: their core business is to provide an excellent customer experience. These companies use knowledge about their customers to continuously offer new services, make buying easier, and offer personalized recommendations. A classic example is online clothing retailer Zappos, which, if its warehouse is out of stock of a particular item, helps customers find that item at another retailer. And as a result, 75% of Zappos’ orders come from repeat customers. Today’s consumers use applications and digital services on a daily basis. Therefore, companies across all industries must accommodate these new consumer expectations and behaviors in order to survive. In a study published in October 2015, 56% of surveyed companies planned to assess the impact of digital as it relates to customer experience, and 63% were improving their online customer experience.10 Companies aware of this shift have already started reworking their processes and procedures to provide their customers with the best possible experience. Take Burberry as an example. In 2006, the luxury retailer introduced a digital transformation initiative to improve and standardize the customer experience on its website and in its stores. The company aligned its online product line-up with the inventory in its stores, and equipped its stores with RFID technology. Inventory problems became a non-issue and the company’s revenue has since tripled. In a completely different industry, insurance company AXA formed partnerships with manufacturers of connected devices so that it can offer customers intrusion detection and fire protection services alongside its home insurance policies. And as another example, a few years ago, Domino’s Pizza introduced an online ordering feature that allows consumers to track when their food is being prepared, when it’s en-route – all in real-time. Now, 25% of all Domino’s orders across the US come from online, and within four years, they recognized a 23% growth in profit. 10 Digital Transformation in the Age of the Customer”, Forrester/Accenture Interactive “In a study published in October 2015, 56% of surveyed companies planned to assess the impact of digital as it relates to customer experience, and 63% were improving their online customer experience.10 II - With digital transformation, customer experience is king 5
  6. 6. Digital transformation and the customer journey There is a network effect with mobility, social media, and connected devices. Companies are now able to reach much broader markets than ever before. Big data, combined with predictive analytics, gives companies much more granular information about their customers. And the cloud gives companies unprecedented agility and speed in responding to fast-changing market demands and customer expectations. On the other hand, digital technology has raised consumer expectations in just about every industry. Today’s consumers are increasingly connected, and expect seamless, efficient, integrated, and consistent service across all channels. And they want that service to be personalized and localized. The good news is digital technology has given companies many new tools for improving the customer experience at each step of the customer journey. A typical customer journey starts from product or service awareness and it is broken down into several phases, ending with the purchase phase or the post-sale phase. In each phase, customers interact with an organization through one or multiple touchpoints that rely on multiple channels. Examples of channels could be websites, social media or mobile applications. Customer journeys also contain multiple moments of truth that are specific points in time where the customer might exit the journey. Decision makers should pay particular attention to these moments, and try to maximize their efforts to ensure that the customer stays on their journey towards purchasing. Customer satisfaction (and/or customer emotion) is another indicator that can help company leaders better understand the journey of a customer and help take corrective actions to improve the customer experience. But, the same journey can be very different from one customer to another, and that’s why customer journeys are always tied to a specific persona. By analyzing customer journeys based on various types of personas, company leaders are able to significantly improve customer experience, which is key in an increasingly competitive market. Today, companies spend an average of 28% of their IT budgets on projects related to improving the customer or end-user experience.11 But improving that experience requires more than just incorporating SMAC technology into customer- facing applications. It also entails making sure that new technology works seamlessly with the company’s back-office systems. Any new service or step in the customer journey needs to draw on the company’s internal processes, which might require some redesign. For instance, out of the 100 IT projects Starbucks had underway in 2013, roughly one-third involved enhancing interfaces with customers and partners. What about existing systems? The above examples show that digital transformation can’t be carried out in a slapdash way. Rolling out initiatives to improve customer experience – or otherwise adopt a customer-centric approach – often requires working with legacy applications or deeply-embedded processes that may not be digital-friendly. Managers should therefore lay the proper groundwork before embarking on ambitious digital initiatives if they want to get an adequate return on their investment. 11 2015 Mobile Workforce“, Dimension Data “Today, companies spend an average of 28% of their IT budgets on projects related to improving the customer or end-user experience.11 6
  7. 7. According to research done by McKinsey, only 30% of major transformation projects are actually successful.12 The causes for failure are usually missing information, inadequate risk management, or insufficient planning. To prevent these risks, companies should take a holistic approach to digital transformation that encompasses strategy, business process, and the IT landscape as a whole. Four factors in particular play an important role: Appoint someone to lead the digital transformation initiative in your organization You need to hire someone to be in charge of the digital transformation initiative in your organization. This role can be held by CIOs with a strong focus on business development. A new role of chief digital officer (CDO) has also emerged in recent years. This individual is responsible for driving growth by converting businesses to digital, and specifically focuses on transformation. The CDO not only defines the digital transformation strategy, but also brings a new innovative vision to the company. This new way of seeing things could lead to acquiring startup businesses, or creating new departments inside the organization from scratch. The CDO will often implement an agile approach to reduce time-to-market for most of the company’s projects. Become a true customer-centric organization Companies need to have a clear understanding of their customer behavior. This can be done by mapping customer journeys to assess pain points and opportunities. These journey maps should be communicated throughout the organization to instill a customer-centric culture, and get business and IT working together towards the same goal. A multi-channel approach should also be taken into consideration because customers interact with companies in different ways. Companies also need to identify the digital capabilities and processes to put in place to support the customer experience. For example, it could be capabilities for a better online experience or a process to achieve faster delivery of customer-facing products or services. It could also be better analytics on customer behavior. On the other hand, leaders need to focus on the projects that have the most impact on their business, and this is only achieved through a clearly defined digital strategy. 12 Keller, Scot and Price, Colin. Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage. McKinsey & Company. John Wiley & Sons, 2011 “According to research done by McKinsey, only 30% of major transformationprojectsareactually successful.12 III - Establishing the right conditions for a successful transformation 7
  8. 8. CAPTURE STRATEGY MANAGERISKS TRANSFORMBUSINESS TRANSFORM IT CAPTURE COMPANY STRATEGY Decide future direction by assessing drivers of change and planning business capabilities PLAN BUSINESS TRANSFORMATION Design new processes by incorporating end-to-end customer experience PLAN IT TRANSFORMATION Identify and assess IT transformation initiatives based on business outcomes MITIGATE TRANSFORMATION RISKS Identify, assess and mitigate the risks associated with your company’s digital evolution 1 2 3 4 4 STEPS TO MANAGE DIGITAL TRANSFORMATION Boost IT agility A company’s IT landscape usually evolves slower than its business needs and markets. But the IT landscape is precisely what a company uses for business-critical steps like order-taking, inventory management, contract management, and billing. Neglecting these essential technology bricks could have a direct impact on front-office applications, since they often pull data from the back-office. Inflexible IT systems create a number of risks for a company, such as an inability to meet delivery deadlines, mediocre performance that could directly impair the customer experience, inconsistent data from one application to the next, and interruptions in customer-facing processes due to “siloed” applications not sharing data with each other. To avoid this type of paralysis, companies need to ensure they have an agile IT landscape – systems in which data can be easily circulated and to which new application bricks can be easily added. For many companies, that would entail modernizing their IT landscape by installing missing bricks or updating old ones. Position the IT department as a genuine business partner In the digital economy, the role of IT departments has expanded beyond simply keeping applications in good working order. They must now also work closely with lines of business to design and implement initiatives that require the support of digitally-driven applications and technologies, which by definition have a large IT component. IT departments must leverage their cross-functional nature to become genuine business partners, even going as far as spearheading change to help drive innovation. Tosuccessfullysupporttheircompany’sdigitaltransformation, IT departments must have a thorough understanding of their entire IT portfolio – and the associated risks. Optimizing that portfolio helps IT departments gain credibility in driving the transformation, most notably by freeing up significant resources: companies reinvest an average of 42% of the savings generated by IT portfolio rationalization into business transformation, according to a 2014 study.13 13 Cap Gemini Application Landscape Report 2014 8
  9. 9. 1. Capture company strategy The first step consists of defining the company’s goals. This involves assessing transformation drivers (which can be either external or internal to an organization), and determining appropriate objectives. Company leaders also need to get a clear understanding of the current state of their company. This can be done through the mapping of business capabilities, which represents an organization’s ability to perform core functions of the business. Then, business managers need to define the different stages of transformation to achieve the defined goals. For each stage, managers can determine intermediate objectives, required capabilities, and related KPIs. Modeling this information from a single source of truth is a vital step in developing a transformation strategy, because it gives managers a clear idea of where the company is heading, and helps them define transformation stages to reach its objectives. Most digital transformation programs don’t start from scratch; they build on a company’s existing business practices, processes, and IT systems. And these existing elements usually need to be rationalized, upgraded, or modernized to launch transformation initiatives under the right conditions. Four key steps can help business and IT leaders prepare their existing architecture and effectively plan out the transformation process. 2. Plan the business transformation In the digital age, digital and customer experience are tightly interwoven. One example is that customers now have multiple channels for making purchases, and endless possibilities when looking for the best products online. Another example is how businesses create a brand personality and leverage digital to stay connected to the customer outside of the purchasing process. This has created unprecedented competitive pressure which affects the pace of innovation in all companies. To combat this, business leaders should consider incorporating customer experience when designing new business processes. To do so, companies need to use customer journey maps to document the end-to-end customer experience. They also need to assess each touchpoint based on customer satisfaction, to help them build or redesign their internal business processes, and maximize customer satisfaction. By linking internal processes to touchpoints, company leaders can easily identify related internal business processes and streamline their processes for an improved digital experience. IV - Laying the groundwork for a smooth transformation “According to Forrester, “Companies are constantlylookingtoreinventthemselves in this new ‘customer’ age. But the agility needed to leverage a new technology or meet a new customer need requires companiestobemoretransparentintheir strategy planning process and to gather more data to improve decision-making and drive performance.” 9
  10. 10. 3. Plan the IT transformation This step is about defining the required IT transformation initiatives to execute the business transformation. It starts by mapping out all the applications currently used in the company’s IT landscape and using those maps to understand how these applications support the business capabilities defined in the first step. Reconciling business needs with IT assets in this way gives IT managers a better understanding of how their application portfolio fits in with their company’s strategy, and lets them plan and implement the changes needed to better align the portfolio with business needs. Once managers have a clear understanding of their applications, systems, and processes, they can start analyzing those elements and outlining action plans. That entails gathering information on the value, condition, and usage of their applications, and identifying any business needs that are not met by those applications. With that information, IT managers can evaluate different change options and prioritize IT transformation scenarios based on business outcomes. Also, IT managers and their departments must remain agile, capable of rapidly deploying the necessary resources and perhaps even switching to a different scenario if needed. 4. Mitigate transformation risks Every transformation scenario has its own set of risks. The risks could be related to the applications themselves (for example, because they are too old, inflexible, or expensive), to new processes that could conflict with other business needs or compliance/security requirements, or to the skills and resources that the company has (or doesn’t have). To integrate risk into change decisions, managers should first identify risks, assess them based on their likelihood and impact, and then implement possible action plans to reduce risk. Risks should also be communicated throughout the organization, so company leaders are all on the same page and can improve decision-making while reducing uncertainty. Finally, a proper governance of risks should be implemented to ensure that risks are constantly monitored, and controls are well in place and effective over the long term. By performing reviews and assessments on a regular basis, new risks are identified and risk level is kept under an acceptable limit. The bottom line here is that companies need to manage risks without jeopardizing the customer experience. These planning and transformation steps should be followed to ensure companies will remain agile for the long term. Business Architect CIO / C-level Business Analyst / Process Owner Enterprise Architect IT Portfolio Manager Risk Manager HOPEX Risk Management HOPEX Business Architecture HOPEX Business Process Analysis HOPEX IT Architecture HOPEX ITPortfolioManagement DIGITAL TRANSFORMATION STAKEHOLDERS HOPEX DIGITAL TRANSFORMATION SOLUTION Reports and dashboards C O M M O N R E P O S I T O R Y MANAGE RISKS Identify, assess and mitigate risks tied to processes and IT assets RATIONALIZE IT PORTFOLIO Streamline your application portfolio and increase the agility of your IT systems TRANSFORM IT Identify and assess IT Transformation initiatives based on business outcomes DRIVE THE DIGITAL TRANSFORMATION Get actionable deliverables through dashboards and reports CAPTURE STRATEGY Decide future direction by assessing drivers of change and planning business capabilities TRANSFORM BUSINESS Design new processes by incorporating end-to-end customer experience 10
  11. 11. MEGA International has developed an integrated set of software solutions, HOPEX, that can support managers in every key step of the transformation by giving them an interactive view of all the business and IT components – including their dependencies – and helping them drive business and IT transformation.HOPEX provides the visibility and tools to improve decision-making and navigate change in a disruptive environment – with a sharp focus on business needs. HOPEX solutions cover the five main fields outlined below. HOPEX Business Architecture Functional coverage Allows business architects to define a capability-based planning of the enterprise transformation that incorporates corporate strategy. The solution can be used to identify and assess drivers of change, and define transformation stages and associated objectives, capabilities and KPIs. It helps assess current and new capabilities based on the defined strategy, and build enterprise transformation roadmaps to align them with the corporate strategy. Example Let’s suppose you are part of a large company that wants to redefine its strategy due to startups that disrupt your own market with new technology and an aggressive business model. The HOPEX Business Architecture solution will help you define your company’s objectives by assessing internal or external drivers of changes (such as new market entrants, disruptive technology, and mergers and acquisitions). You will then be able to create an enterprise roadmap and define the required transformation stages to achieve your business goals. You can then associate objectives for each stage, as well as the required business capabilities and KPIs. HOPEX Business Process Analysis Functional coverage Gives business analysts the ability to describe and understand the organization and its business process. They can design customer journeys and build action plans to improve business processes. The solution also helps conduct as-is/ to-be analysis, create and monitor key performance indicators tied to processes, engage in risk mapping to include risks and controls in process models, and create reports to share information across the organization. It includes features such as Easy Diagram, which automates the creation of diagrams, and it uses collaborative technology to streamline and centralize diagram corrections, approvals and assessments. Example A company wants to improve its business processes while integrating customer experience. The company will first model the customer journey and identify key moments for which the customer is likely to get out of the buying cycle or conversely continue the journey.  Then, the company can look at the business processes and sub-processes associated with each touchpoint (such as handling orders, managing inventory, and billing) to see whether they are effective or need improvement. This information will help the organization identify exactly where it should focus its transformation efforts.  V - Solutions to guide your transformation 11
  12. 12. HOPEX IT Portfolio Management Functional coverage Allows IT managers to reduce complexity and improve the visibility of their IT assets, cut costs, and transform the IT portfolio, while anticipating business and technology risks. The solution allows portfolio managers to collect detailed information about their applications and technologies, including costs, lifecycle, and risks, as well as business capabilities and business processes associated with each application. The solution gives IT managers the tools they need to assess their application portfolios, making it easier to spot redundant, expensive, and obsolete applications, as well as the most strategic ones. And with the solution’s various dashboards, and simulation and comparison features, IT managers can make faster and better-informed decisions to transform their IT Portfolio. Example Suppose your company wants to merge a new online business application with a legacy application which is at the end of its lifecycle, but has important data for the roll-out of the new service. You can use the HOPEX IT Portfolio Management solution to compare different transformation options, such as replacing the application in the next two months or migrating the data to the new application. You can use this information to assess impact on business operations. For each application, you can also track various parameters, such as application lifecycles and supported business capabilities, to facilitate the transformation of your portfolio and remove obsolete applications. HOPEX IT Architecture Functional coverage Gives system architects the ability to model their system architecture, including all the different components (data, applications, infrastructure, and technology) and their dependencies. It helps managers understand the impact of planned changes to IT systems, whether in terms of projects to implement, the required resources, or the associated risks. The solution can also be used to model a target system architecture and help determine the best way to reach that target through planning and gap analysis features. Example To effectively plan a transformation initiative, you need to have a thorough understanding of your existing IT architecture. For instance, if you want to introduce an order tracking system for mobile devices, you need to know which components of the supply chain and CRM systems would be affected – and which technologies may be lacking, such as the ability to send text alerts. That information will let you design and map the best way to implement the initiative HOPEX IT Risk Management HOPEX Risk Mapper Functional coverage Gives managers essential risk mapping and assessment tools that can be used to evaluate individual processes or IT assets. The solution can also help managers plan risk mitigation initiatives and track implementation. It helps them assess risk impact and likelihood, and integrate risk into change decisions, as well as define preventive controls to mitigate identified risks. Example All the risks associated with a given project should be carefully assessed well before the implementation phase. Taking the previous example, suppose you spot a risk related to a subcontractor that handles an important step in your supply chain. You could mitigate that risk by setting up an alert system with the subcontractor to make sure the right tracking data arrives at the right time. 12
  13. 13. CONCLUSION Digital business is not a temporary phenomenon. On the contrary, it has a profound impact on every company’s strategy and operations, and will continue to do so for a very long time. The digital revolution revolves around the following: cloud, mobile devices, big data, and social media. Combined, these four technological advancements have deeply changed our behaviors as consumers: think of what you can do on a mobile device - it’s as if you were holding a full encyclopedia in your hands, you can get access to an infinite variety of products and services very easily and quickly, and reciprocally businesses know exactly what you like (or dislike), and where you are. This transformation is not limited to the consumer world, think of Industry 4.0, where systems work and communicate together thanks to the Internet-of-Things. The organizational impact on many industries is absolutely enormous. The market has already been disrupted in many sectors, with new entrants improving traditional businesses. Incumbent companies are no longer blocked by barriers to entry. That’s why companies need to take action and become part of the digital revolution. A great way to start is by appointing someone to be in charge of your organization’s digital transformation. This person’s mission is to instill a new corporate culture centered on the customer experience and the company’s agility in order to convert business into digital. Four recommended steps are: • Capture the company strategy to define goals and plan capabilities • Plan the business transformation to create or improve processes while taking into account the customer experience • Plan the IT transformation, assess different transformation scenarios, and select the best one • Mitigate transformation risks without jeopardizing the customer experience 13
  14. 14. www.mega.com MEGA INTERNATIONAL MEGA International is a global software firm helping companies manage enterprise complexity by giving them an interactive view of their operations. Executives gain the visibility and information they need to make the right choices for effective governance and for striking the right balance between capacity for innovation, cost optimization, and risk management. Backed by HOPEX software and MEGA consulting services, companies can boost business and IT agility in today’s disruptive business environment. Managing Enterprise Complexity mega.com September 2016

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