Digital transformation 2.0: The new challenges and how to overcome them

In 2016 Marketing Week explored the true meaning of ‘digital transformation’. One year on we look at how brands are tackling the challenges and what the new priorities are.

digital transformation

Digital transformation is firmly on marketers’ agendas. Last year Marketing Week explored what digital transformation really means for businesses from a practical perspective. Now brands are on their way to making those changes, marketers need to understand the new challenges arising as a result and how to address them.

Keeping up with the pace of change in the industry is one thing, but when it comes to digital transformation there are other factors marketers must consider to stay ahead of the curve.

The digital skills gap and the ever-growing chasm between the needs of employees of different generations, customer expectations, in-house skills versus third-party providers, the technology stack and legacy structures are just some of the things giving marketers a digital headache.

READ MORE: What does ‘digital transformation’ really mean?

In-house skills versus external experts

One of the hottest topics for debate is whether businesses are best off bringing expertise into a business or training existing staff up versus outsourcing.

“While I wouldn’t like to see digital expertise in silo, there is a need to bring expertise in from the outside world, according to Antonia McCahon, global digital acceleration director at Pernod Ricard, who also chairs the World Federation of Advertiser’s digital forum.

“We can’t repurpose everybody,” she adds.

Pernod Ricard is in the midst of a “huge road map in media transformation” and therefore the brand requires specialists who understand advertising technology, how trading desks function and the key dynamics of advertising agencies.

McCahon explains: “That’s expertise we didn’t have in-house. To boost, and boost that quickly, we do need to bring expertise in from the outside world.”

You need to have a good mix of people who understand the heartbeat of an organisation but you also need the best in the industry.

Jon Mansley, LV=

However, there must be a balance, according to Julie Dodd, director of digital transformation and communications at support and research charity Parkinson’s UK.

“You want to have expertise in-house and a solid team of experts, but we also work with [agency] Manifesto on creative ideas and digital strategic support,” she says.

“You have to have someone inside that can help make the right choices, but for an organisation like ours, having the strength and depth of digital expertise that you get from an agency – our sector is a long way off that. Except for the mega charities that can maybe afford to build very expensive team of staff.”

READ MORE: Who should lead a digital transformation?

Insurance brand LV= recently appointed TH_NK agency to work in partnership with the company to develop and implement a digital transformation strategy that will help shape the future direction of its general insurance business.

Jon Mansley, head of digital strategy and propositions at LV=, agrees with Dodd about a balance of outside expertise and in-house champions. He says: “You always have to have a hybrid for any successful delivery. You need to have a good mix of people who understand the heartbeat of an organisation but you also need the best in the industry. You need people who are digital experts working alongside the people who are LV= experts.”

But Mansley warns that the challenge with digital transformation for any organisation is “the expectation management of what is possible and how quickly we are able to deliver against that”.

He says: “The biggest mistake financial services organisations make is that we tier reference ourselves to other financial service organisations. We are talking about being able to build an LV= customer experience that would hold itself against an Amazon, Airbnb, or – that is who our peer group is and that’s the customer experience that consumers take in their mind as their expectation when they come and interact with a company like LV=.”

READ MORE: Report – The fundamentals of B2B digital transformation

The digital skills challenge

The skills needed therefore are not sector specific. Research from Arrows Groups shows a 15% uplift in demand over the past 18 months for development platforms like Ruby on Rails, Hybris and Go from a range of fast-growing technology businesses.

CEO and founder James Parsons, says: “These front-end skills weren’t even on businesses’ agenda a few years ago. Now we’re finding our clients are constantly on the hunt for those who will be able to help them expand and tackle technical challenges.”

Finding the right talent for digital transformation projects is also strained by the UK’s decision to leave the EU, according to Parsons. He says: “We’ve noticed a reluctance in the top digital talent coming to the UK since the Brexit vote, with our own data revealing a 10% reduction of skilled workers from within the EU relocating to the UK. While the digital opportunities are most certainly here, we’re facing a situation where the talent potentially isn’t.”

READ MORE: Mark Ritson – A ‘hard Brexit’ will be harder on marketers than anyone

There is also work to be done within organisations to allow those with digital skills to work efficiently. Office equipment firm Ricoh UK’s ‘Digital Dexterity: Denied’ campaign highlights the need for businesses to change their culture when it comes to technology.

Chas Moloney, director of Ricoh UK says the aim of the research was to understand, from a generational gap perspective, what actions organisations are taking to recognise the different needs, wants and desires of all employees, no matter their age.

As part of their research, Ricoh surveyed 2,000 UK office workers in businesses with 100 or more employees. It discovered 44% of workers believe social networks and collaborative technologies strengthen workplace relationships.

You always have to wrestle with legacy systems and historic architecture that will never move at the speed you need it to.

Blake Cahill, Philips

Despite this belief, however, 46% of organisations have banned Facebook while a further 34% have denied access to Twitter meaning collaboration becomes challenging.

Ricoh is calling on organisations to not only lift the ban on these networks, but to work with employees to find the best way of ensuring people can work in the most effective way.

Moloney says: “The expense of bringing the best talent in could be for nothing if you’re not actually allowing people to engage with digital transformation in a way that allows them to step forward.”

He believes there is an education piece to be done so companies realise that “one size doesn’t fit all”, and that they have to “flex digital transformation policies and processes to make sure they meet the needs and wants of individuals across the organisation”.

If they don’t, he warns “your people won’t be as productive or motivated, they won’t be engaged and ultimately they will look for organisations that are meeting their needs and wants”.

Dealing with size and legacy systems

Digital transformation for Philips is a combination of ensuring the basics are in place but also having a transformation “DNA” inside the company when it comes to experts in marketing, communications, brand and even supply chain.

This is so it can “digitise to whatever is happening next”, according to Blake Cahill, global head of social and digital marketing at Philips. But transformation is a challenge for the marketer because of the size of the business and legacy systems.

He says: “You always have to wrestle with legacy systems and historic architecture that will never move at the speed you need it to.”

old way new way

However, he says the brand has “cracked it a bit” by using “two-speed teams”, which he describes as having teams both at the front and back ends. He says: “We try to move at a faster pace at the front end than the back. If you don’t decouple it a little bit everything will be slow, they have to come together but you need two speeds.”

READ MORE: The biggest barrier to digital transformation is a legacy mindset

For McCahon at Pernod Ricard the issue comes from needing to ensure transformation never ends, because while the business has done a lot in terms of bringing efficiencies to the business she knows “there’s a lot more we can do”.

She adds: “With that comes the inherent problem of a big slow moving machine that is successful [so] you have to create that burning platform for change in a business that is already thriving and set up a case for five to 10 years time.”

Banking is a prime example of an industry that requires future thinking as it continues to be challenged by the fintech movement.

READ MORE: Virgin Money’s CEO on beating fintech disruptors

HSBC is already making headway in the digital services it offers to keep up with the innovative services that are emerging. For example, touch ID allows people access the mobile banking app by scanning a fingerprint in the same way smartphone users unlock their phone. It also offers text message alerts for informal overdrafts, which has helped customers save £100m in fees since launching and has pioneered the largest roll-out of biometric technology in the UK, allowing users to access their account, mobile app and telephone banking.

“Digital demands vary from customer to customer but the long-term direction is very clear,” says Taylan Turan, head of transformation, Europe at HSBC. “Workplace, home or on the go they want to access services in any way they want. This is the context for us.”

He adds: “You need to be thinking ahead and that’s what we do – looking at the global technology trends, not just in financial services, across markets, investing in the technology that will be the most benefit to customers now and in the future. Many of our customers already choose to manage their finances digitally. That will just continue and we will respond to that demand.”

Measuring the impact of digital transformation

Business in the Community, the Prince’s Responsible Business Network, which is designed to address issues that help create a fair society and sustainable future, has launched a new set of priorities for businesses to take in response to digital transformation.

The priorities, which have been developed in partnership with Accenture, highlight the need for brands and marketers to take steps towards addressing and tackling some of the unintended negative consequences of digital transformation projects and ensure it is inclusive and beneficial to all involved, internally and externally.

“It’s very easy to get beguiled by technology,” says Business in the Community chief executive, Amanda Mackenzie. “It’s not that technology isn’t amazing and doesn’t do incredible things, but let’s just think it through and mitigate the downside of some of those technologies.”

The recommendations ask businesses to anticipate automation by creating new roles where technology complements human work instead of simply replacing it; to proactively make services accessible to the 16% of UK adults without the skills to buy goods online customers; to harness technology to solve global environmental and social issues such as cutting waste and improving health and education; and better use technology to tackle corruption, exploitation and environmental standards in supply chains.

These priorities form part of a new project ‘A Brave New World’ which has the aim of creating an inclusive digital revolution.

Mackenzie says: “Inevitably some of the scenarios in terms of jobs are inextricable – we can’t necessarily stop them but [businesses] can help by reskilling.”

She adds: “There are other things that need looking at, such as protecting, supporting and empowering customers.” Mackenzie often quotes Barclays as a case study for this as the bank skilled 16,000 employees as digital eagles so those members of staff could teach customers about the digital world and being safe online.

“That’s an obligation of good companies,” she adds.