Realizing the ROI of Future-Ready Digital Ecosystems:
by LARRY HAGENBUCH AND BG WEISS
Better Experiences, Unified Strategy and Streamlined Operations
In 2019, 85% of business leaders
polled in a Forrester survey reported
that they considered digital capabilities “nice to have,” and in 2020, about
half of businesses reported that digital transformation was their top priority.
Businesses have come to realize that a connected, responsive, future-forward platform can be the differentiator between businesses that thrive and those that fail. In fact, experts predict that 65% of global gross domestic product (GDP) will be digitized by 2022 and global spending on digital transformation will hit $6.8 trillion by the following year. In response, the acceleration of digital initiatives is to be expected.
Digital transformation and the creation of digital ecosystems is not a new concept. But recent events have highlighted an urgency for businesses to start investing intentionally in this area.
In an increasingly crowded market, it is more important than ever to outperform the competition. Digital technologies, when optimized as part of a larger strategy, can help businesses create future-ready ecosystems that streamline operations, facilitate data-driven decision making and deliver exceptional experiences for consumers and employees.
Having many disconnected, high-quality technology applications is not enough in today’s marketplace. A lack of integration results in gaps in data that hinder productivity and inhibit exceptional user experiences.
Instead, a digital ecosystem is an integrated and interoperable platform encompassing all of a business’s digital solutions. The aim is to realize efficiencies of scale, amplify operational excellence, improve user experience and ultimately impact the bottom line.
There are five elements of a successful digital ecosystem: strategy, operations, culture, technology and data. When each component of this framework is mastered, organizations realize the full potential of a transformative digital ecosystem. In the race for consumers and top talent, it is not enough to offer “seamless” experiences; rather, businesses must fundamentally differentiate their brand by making their digital landscapes relevant, connected, personalized and future-ready.
Creating a Future-Ready Digital Ecosystem
Organizations that invest in the creation of a future-ready digital ecosystem will realize benefits for years to come. While some of these gains are less directly connected to the bottom line, all efforts that improve an organization’s value proposition can ultimately be tied back to dollars and cents. To realize the full benefits of an enterprisewide digital transformation, businesses must master the competencies outlined previously.
The Return on Investment of Digital Ecosystems
At the end of the day, any investment in digital transformation is made with the bottom line in
mind. So, how can a robust digital ecosystem
improve financial performance? The answer is
simple — by making it easier, faster and more efficient to do business.
When technology platforms and applications are designed to coexist harmoniously, efficiencies of scale are realized and organizational change is more readily made. Digital platforms also improve productivity by supporting remote work and making collaboration easier for cross-functional teams. When these technology systems are optimized, customers are satisfied and employees are engaged, and businesses are empowered to innovate offerings, enter new markets, cut costs and grow their revenues.
Improved Financial Performance
Improved Financial Performance
As operations shift to align to a more digital environment, so too must employees. This can present both a significant organizational risk and an opportunity. Businesses that lean into the change and effectively support their employees through the disruption (via solid change management, clear strategy, incentives and training) stand to realize improvements in their employee engagement scores.
At the same time, just as improved digital experiences engender customer loyalty, employees feel better about working for a company with a platform that meets (or exceeds) their standards for efficiency and ease of use. If they can spend the majority of their time doing high-value work rather than dealing with inefficient systems and processes, their engagement will increase.
Enhanced Employee Engagement
Enhanced Employee Engagement
Customer experience in today’s market revolves around a primarily digital marketplace wherein customers have adopted a virtual-first mindset — what Gartner coins the “everything customer.” More and more, customers (both internal and external) are receptive to digital interactions with businesses, and organizations should capitalize on this paradigm shift by investing heavily in resources that support digital experiences across their ecosystems.
Organizations with improved digital service are securing much-coveted market share at a time when competition for customer loyalty is fierce. By using customer insights along the buyer’s journey, organizations can optimize their outreach and service strategies to design an exceptional omnichannel customer experience strategy.
Improved Customer Experience
Improved Customer Experience
More and better data is one byproduct of digital ecosystems. While these transformations are usually not undertaken solely for the purpose of increasing volumes of data, increased visibility into customer preferences, employee behavior and organizational performance can prove to be a boon for leaders looking to navigate disruption.
When data is tied to organizational goals, harvested in a timely manner and understood by relevant stakeholders, it can aid decision making to support organizational agility — a capability that is often tantamount to success in today’s economy.
Data-Driven Decision Making
Data-Driven Decision Making
While the hype over digitalization may have waned after years of discussion, the urgency for action has only increased. In light of the change experienced by the majority of organizations throughout the COVID-19 pandemic, the necessity of a digital ecosystem has become increasingly apparent. Although the need is clear, business leaders often struggle to make impactful, sustainable digital change. By adopting an approach that incorporates a clear strategy, an adapted operating model, change-readiness, technology optimization and data utilization, businesses can improve their chances of creating a differentiating digital ecosystem that lasts.
Click on each icon for more detail.
A defined digital strategy helps organizations avoid strategic misalignment and maintain focus on the most urgent priorities.”
Some elements of their role as
executive sponsor might include:
• Articulating the vision.
• Setting the strategy.
• Defining the objectives.
• Selecting the right project leadership.
Chief executive officers (CEOs) and chief financial officers (CFOs) are in a unique position to provide valuable perspectives when it comes to digital transformation. The vantage points of the CEO
and CFO extend from the business’s finances to
the overarching strategic direction, giving them
a comprehensive picture of the organization’s strengths, weaknesses, opportunities and threats
and making them the natural leaders of any digital transformation journey.
The Role of a CEO/CFO
Any enterprisewide digital initiative requires a clearly defined strategy to be successful, and the creation of a digital ecosystem is no exception. In fact, it may require even more strategic vigilance than other, less complex, programs.
A defined digital strategy helps organizations avoid strategic misalignment and maintain focus on the most urgent priorities. It can also aid leaders with making critical, real-time decisions that may impact the success of the project.
Develop a Clearly Defined Strategy
Organizations often struggle to define and execute their strategies effectively because leaders become too boxed in by present-forward thinking. This limited mindset can cause organizations to overlook changing market conditions or miss other indicators of disruption. What future-focused organizations understand is that disruption provides an opportunity to create real, necessary change.
A clear vision is critical for any digital transformation effort because it provides a sense of direction for the enterprise while also guiding the decision making of its leaders. Without this vision, the motivation, engagement and, ultimately, execution of any initiative are at risk.
Be Founded on a Clear Vision
Even the most ambitious and well-planned digital strategy can fail if divorced from the organization’s
larger strategic vision. To ensure
the health and longevity of any digital transformation, project leaders
should crosswalk their objectives
with enterprise priorities to ensure alignment. When digital transformation is undertaken intentionally and strategically, it stands a better chance of succeeding long term.
Connect to the Larger
To be effective, a digital ecosystem strategy must:
Some of the key enablers businesses may want to consider implementing into their new digital operating models include:
To optimize the business’s operating model to support digital transformation, the COO may focus on:
• Process improvements that align to
• Enabling business continuity via
• Breaking down siloes and fostering
collaboration across teams.
• Evaluating the efficacy of the operating
Chief operating officers (COOs), due to the
central nature of their roles, are well positioned to lead large-scale change across the enterprise.
The Role of a COO
Digital-first businesses require a digital operating model. And, for most organizations, that is going to mean starting from scratch with a more agile operating model than
they have ever conceived of previously.”
With the right strategy, businesses can get a strong start toward establishing a digital ecosystem. But in order to scale the project quickly and sustainably, they must also have the right operating model in place to support the evolving digital business. This means constantly assessing the model to ensure efficacy and compatibility.
Sustaining a digital ecosystem requires more than a new department. It takes a fundamental shift in the business toward human-centered design combined with an improved technology landscape. Digital-first businesses require a digital operating model. And, for most organizations, that is going to mean starting from scratch with a more agile operating model than they have ever conceived of previously.
Establish a Digital Operating Model
There continue to be significant opportunities to leverage intelligent automation (i.e., using machines to perform tasks otherwise conducted by humans) to improve operational and administrative workflows. The most innovative organizations are identifying where processes can be standardized and automated with technology to reduce manual effort and promote consistency.
Much like a shared services
model, centers of excellence are established to concentrate complementary expertise in a specific area. Because the digital ecosystem sits at the intersection of multiple enterprise functions, smart business leaders surround themselves with the expertise, insights and perspectives of experienced professionals. These cross-functional teams help to break through barriers in order to oversee progress, establish clear governance, drive quality, optimize service delivery and enable efficient resource utilization.
Centers of Excellence
Delivering services through a centralized model of shared services optimizes internal resources, standardizes processes and aligns technology. When well designed and carefully implemented, the model can result in lower costs, higher employee satisfaction and greater customer service. Leaders should ensure the model provides sufficient flexibility to handle volume fluctuations and future changes in the organizational makeup.
Any new technology or associated processes should be designed with the end user in mind. Change is always difficult, but it can be made much easier if the change makes sense, has been well thought out, and has a clear plan for execution and maintenance. Involve key stakeholders and end users from the beginning to help them understand the role they play in the program’s success.
A change-ready culture is one in which employees, leaders and executives embrace change as a constant. This adaptability allows the organization to pivot as needed to optimize the digital ecosystem. The key is to ensure all employees understand how their behavior and involvement will help to shape the future of the business.
Training, development and other types of employee support are essential throughout periods of change. Employees must be equipped to function in a digital-first environment, and it is incumbent on the organization to help them bridge that gap. Training and communication with users should also highlight the benefits of the transformation to help drive adoption.
To foster a change-ready culture, leaders should invest intentionally in:
• Investing in change management and
• Keeping track of employee engagement and
supporting efforts to improve it.
• Delivering robust employee development programs
that focus on digital skills.
• Mandating leadership training and holding leaders
accountable for consistency.
• Hiring for top talent with the right skills to thrive in
a digital-first environment.
While all executive leaders should be heavily involved in the development of a change-ready culture, the chief human resources officer (CHRO) can play a pivotal role in the shift by:
The Role of a CHRO
Any kind of major initiative, like digital transformation, is going
to force individuals and groups to work outside
of their comfort zones
and test the enterprise’s general capacity and appetite for change.”
Another key prerequisite for building a sustainable digital ecosystem revolves around the organization’s culture and people. Any kind of major initiative, like digital transformation, is going to force individuals and groups to work outside of their comfort zones and test the enterprise’s general capacity and appetite for change. Without a core of engaged professionals behind it, the creation of a modern digital ecosystem becomes impossible.
Foster a Change-Ready Culture
To deliver a robust data analytics landscape that supports decision making and enables transformation, leaders should focus on:
These leaders may focus on using data to:
• Better understand (internal and external) consumers.
• Iterate on successes.
• Course-correct when things go wrong.
• Innovate and improve products and services.
• Design consistent, exceptional user experiences.
Chief experience officers (CXO), chief revenue officers (CRO) and chief commercialization officers (CCO) were once rare positions. In today’s market, though, there is an urgent need for leadership focused on stakeholder experience and market positioning to ensure relevance as individual preferences change.
The Role of a CXO/CRO/CCO
When organizations invest in the creation and deployment of accurate, timely data insights related to real-world challenges, they empower clearheaded leadership and protect themselves from the vulnerability that comes with making quick decisions based on incomplete, misaligned
or outdated information.”
As data volumes increase, businesses are pursuing methods for extracting insights that help them better understand internal and external customers, iterate on successes, and innovate to deliver product or service improvements. In an environment characterized by unprecedented disruption, it can be difficult to make time-sensitive, mission-critical decisions based on incomplete or imperfect data. Yet, that is the reality most businesses find themselves navigating today.
When organizations invest in the creation and deployment of accurate, timely data insights related to real-world challenges, they empower clearheaded leadership and protect themselves from the vulnerability that comes with making quick decisions based on incomplete, misaligned or outdated information. Although the challenges will change over time, organizations with flexible, technology-enabled data solutions will enable data-driven decision making and be better equipped to pivot as needed.
Analyze the Data
With any new technology or system (on-premise or cloud-based), risks are inherent.
With more and more businesses shifting to the cloud, data is
also more accessible to hackers. And periods of transition often signal instability for businesses. Leaders should take a multifaceted approach to combating these threats that includes regular app and
network penetration testing
and comprehensive security
In the past, businesses integrated
their systems by connecting them point by point. The more modern approach requires a centralized model with a digital integration hub at the core. This model mitigates risk by reducing the number of potential failure points within the system.
Integration and Interoperability
Technology alone is insufficient to drive long-term change. Associated process improvements that align to desired future-state workflows should also be a focus. Keep in
mind the end users of any new technology and solicit their input
as to how and whether their processes might be improved in tandem with the adoption of more efficient applications.
To ensure successful technology implementations,
leaders should simultaneously focus on:
To make an impact, these leaders might:
• Integrate security into the program’s design.
• Support end users in learning new applications
• Enable virtual work and collaboration.
• Focus on interoperability and data decentralization.
• Eliminate redundancies.
• Invest in the right technology solutions.
• Create governance protocols.
• Deliver intelligent automation solutions.
Whether an organization has a chief technology officer (CTO), a chief digital officer (CDO), a chief information officer (CIO) or some combination thereof, these executives are essential to building
a successful technology infrastructure that supports the digital ecosystem.
The Role of a CTO/CDO/CIO
The implementation of new technology will only provide a leg up for businesses that pair it with the right strategy, the right team and the right operating model.”
Integrating a cutting-edge platform with updated workflows that align to a clear digital strategy can eliminate gaps in an otherwise successful project. By investing in a technology infrastructure that supports the organization’s goals, the business can achieve the connected end-to-end systems that make up a true digital ecosystem.
The implementation of new technology will only provide a leg up for businesses that pair it with the right strategy, the right team and the right operating model. When these elements are functioning synchronously, it can position businesses to better manage disruption, reduce friction, break down siloes and increase resilience. New technology is not the goal of a digital ecosystem; it can, however, be an enabler or an accelerator of transformation.
Build the Technology Infrastructure
For data to really make an impact at the enterprise level, leaders should review it more regularly. While many organizations are used to discrete monthly, quarterly or annual review cycles, the most forward-thinking organizations consider data review a continuous, ongoing process. The more regularly leaders access the data, the more ingrained it will become in their everyday decision making.
Aligning upfront around a set of KPIs can help leaders to stay
the course when confronted with shifting priorities or evolving realities. Tracking business performance against these objective goals allows for a
clear-eyed view of what is working and what is not, thus arming leaders with quantitative evidence to support a move to double
down or course-correct.
Key Performance Indicators
To optimize their technology infrastructures, many organizations are modernizing their systems by migrating to the cloud. This allows them to consolidate needed data
to critical applications and enables leaders to access accurate, timely information needed to make
real-world, real-time decisions.
Global spending on digital transformation by 2023
About the Authors
BG is a technology, sales and strategy leader with more than two decades of experience advising large organizations through successful digital transformation.
Scott specializes in corporate finance, digital transformation and performance management. He has spent nearly 20 years collaborating with clients on process improvement and technology strategies to enhance financial and operational performance.
Larry has more than 20 years of experience building and developing management teams, creating innovative business and marketing strategies, and implementing lean disciplines for manufacturing and distribution organizations.
Click around the diagram below to jump to each corresponding section.