Digital transformation: 5 early warning signs you're moving too slowly

How do you know if your business is falling behind on digital transformation? Here are five warning signs, plus best practices to help you hit the reset button
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Due to COVID-19, most industries have had to make significant changes in how they do business. Firms can no longer afford to put their digital transformation initiatives on the back burner, nor can they rely on the same old KPIs and metrics for measuring success.

As a CIO, you’re constantly looking for ways to help your organization stay competitive. But how do you know if your business is falling behind or moving too slowly? Here are five warning signs to look out for, plus some actionable best practices to help you stay ahead of the curve.

[ Get answers to key digital transformation questions and lessons from top CIOs: Download our digital transformation cheat sheet. ]

1. Your digital channels aren't delivering

As you look to digitally transform, make sure each of your digital channels – website, social media, email, mobile applications, e-commerce, and customer support – is aligned with your business goals and objectives and delivering a single, unified customer experience.

Your customer might see an advertisement on their mobile device, engage with your social content, shop online from their desktop – wherever they interact with you, the experience should be seamless. That means your messaging, design, and content should be optimized to reflect your customers’ interests, incorporate personalization, and deliver a consistent brand message. To further enhance your service, gather information from each of these channels to learn about consumer habits, behaviors, and search trends – just like Netflix and Amazon do.

If these things aren’t happening, it’s time to redirect every cent you’re spending on digital transformation. Delivering friction-free, omnichannel excellence will reduce costs, increase operational efficiency, and improve the customer experience, leading to more revenue.

[ Read also: How to beat digital transformation fatigue and Digital transformation: 5 ways COVID-19 is forcing positive changes. ]

2. Revenue from digital channels is stagnant

If you haven’t assessed how much revenue you’re driving through your digital channels versus brick-and-mortar locations, now is the time.

If you haven’t assessed how much revenue you’re driving through your digital channels versus brick-and-mortar locations, now is the time.

Consider the auto parts sector. If you’re shopping for the right part for your car or truck, chances are you need help from a sales associate. But as consumers switch to online fulfilment channels, much of what has traditionally happened in person is now being transacted over an app, chat bot, or recommendation engine.

As buying behaviors change — particularly generational behaviors — don’t miss out on new revenue opportunities. Weigh the impact of digitizing your customer touchpoints against a revenue target so you can see at what point you’ll realize meaningful ROI, then budget accordingly.

3. Your investment in application development isn't paying off

In the current economic climate, cutting costs is essential. And while there are plenty of developers willing to charge you a cheap hourly rate, you get what you pay for. At the same time, spending a ton of money doesn’t always translate to success.

As you assess your digitization efforts, lack of ROI is a red flag that things are moving too slowly. If you cut costs in application development without seeing a corresponding increase in key metrics such as transactions, subscriptions, users, or revenues, your digital transformation could be stalled.

Try conducting an objective audit of your organization and determine which elements of your IT budget should be allocated to revenue-generating digital offerings. Going beyond funding the status quo, the audit should include input from cross-functional teams on business goals and value-generation activities that will yield significant ROI.

This last point is important. In addition to being under constant pressure to lower the cost of IT relative to expenses and revenue (even if it means stymying innovation), you also need to keep an eye on where budget can be allocated to ideas or promising projects that might not otherwise get funded. Budget for today while still planning for tomorrow.

4. Third-party fulfillment platforms are eating your lunch

As consumer behavior has changed due to COVID-19, platforms such as Uber Eats, Grubhub, and Instacart have reported record revenues. However, if you’re in the restaurant or hospitality business, a big chunk of that revenue is coming out of your profits. That’s another warning sign you need to accelerate your digital transformation.

In the past, this revenue-share model was tolerated. But now, restaurant managers who may have previously thought takeout would cheapen or otherwise hurt their brand are considering getting into the delivery business. These platforms may be the key to expanding market reach and profits – even as on-premises dining opens again – without sharing those profits with an independent commercial platform.

Whatever your business, find ways to move away from relying on third-party apps. Start by conducting a capability audit. How reliant is your business on outside vendors like platforms that require you to forfeit margin? Where are new internal capabilities needed? What are the costs of profit-sharing with third-party developers versus developing a white-label platform via your own website?

5. Employees are fleeing

Finally, you may think your company is a great place to work, but if your employees are walking out the door, it could be time to speed up your digital transformation.

You may think your company is a great place to work, but if your employees are walking out the door, it could be time to speed up your digital transformation.

Transformation isn’t just about technology – it’s also about culture. Remote working is a great example. Work from home has always been a hallmark of forward-thinking companies and COVID-19 made it mandatory for many other organizations to get on board. This trend will likely continue. For instance, Google recently extended its remote work policy until July 2021. Companies that don’t embrace it will experience attrition as employees move to other organizations that they perceive to be more forward-thinking (i.e., more “transformed”).

In addition to telework options, there are other ways you can support technical talent, such as supporting and financing continual education — both on-the-job and through annual tuition reimbursement. Develop a culture that makes work meaningful, advances employees from within (45 percent of tech talent leaves because they are concerned about the lack of opportunities for advancement), and hire managers who care committed to helping your talent grow.

Consider embracing the gig economy. You may not need all the full-time staff you have now – maybe you need 80 percent, or maybe you need 30 percent, with the rest being contractors. So, take time to measure attrition. Look at who’s leaving – and why – so you can take steps to mitigate these warning signs. Let the workforce dynamic model the agility of your newly transformed organization.

Reset and accelerate your digital transformation

The pandemic has made all of us rethink what we do and why we do it. It’s provided everyone with a reset button of sorts. That goes not just for individuals, but businesses as well. Now’s your chance to hit that reset button, get rid of what’s not working, and make data-driven decisions about accelerating your business into a digital future that’s here and waiting for you right now.

That doesn’t mean you have to change everything right now. The pace of change is faster than ever, and if your company changed everything today, you’d have to rebuild again a year from now. Few organizations have the flexibility or budget to do that. A better strategy is often to see what transpires for the true disruptors. See what you can learn from them and bring it back to your own organization to help you realize the best return on investment over a three- to five-year period.

[ Culture change is the hardest part of digital transformation. Get the digital transformation eBook: Teaching an elephant to dance. ]

Patrick Sheridan is co-founder and managing partner of Modus Create. Pat is focused on the intersection of design, technology, and business. He saw the need for a high-end product consulting firm built with open source team design and the concept for Modus Create was born.