Achieving “digital maturity” requires incremental achievement at successive levels, just like climbing Maslow’s Hierarchy in your personal life.
A couple of years ago, I had the pleasure of meeting Alex Honnold, the professional rock climber, when he spoke at our FICO World conference. Alex is the first person to scale the 3000-foot granite wall of El Capitan in Yosemite National Park “free solo”-style… meaning with no ropes or safety gear. It’s a half-mile straight up, and he did it in just three hours and 56 minutes. National Geographic calls it the “greatest feat of pure rock climbing in the history of the sport.”
What was Alex’s secret? Before his trek, he spent a year studying the mountain and strategizing the one route that would result in contiguous progress, avoid dead ends, and ultimately lead to the optimal route to the top. His climb wasn’t just a testament to Alex’s incredible physical talent but also to his methodical, analytical approach to the effort: he not only scales a mountain, he outsmarts it.
Fellow climbers told National Geographic that they marvel at Alex’s mental preparation and his “unique ability to remain calm and analytical in dangerous situations.” When asked, Alex explains, “With free-soloing, obviously I know that I’m in danger; but feeling fearful while I’m up there is not helping me in any way. It’s only hindering my performance, so I just set it aside and leave it be.”
That’s the sort of unwavering confidence good up-front planning and strategizing can give you if you are in the midst of a digital transformation effort for your company.
Scaling the corporate El Capitan: digital transformation
Traditional companies locked in competition with digital-first competitors are scaling peaks of their own, and they are struggling: the number of companies who say that they have succeeded in achieving digital maturity goals – for purposes of discussion, let’s call “digital transformation” the journey and “digital maturity” the destination – is just 18%. Interestingly, that’s down from 30% a couple of years ago, according to the composite average of studies conducted by McKinsey, Boston Consulting Group, KPMG, and Bain & Company. And that is despite trillions of dollars in spending on digital transformation efforts over the past five years and even more in the next five.
Why are companies struggling with their digital transformation efforts? A big part of it is the sheer enormity of the task: digital transformation touches every person, process, and piece of technology across the enterprise… as well as every customer, prospect, and transaction. With so many moving parts and so much on the line, it’s daunting to think about, like standing at the foot of your own El Capitan.
They say every journey starts with the first step, so make it the right one. My first piece of advice is to resist the Big Bang approach. Companies who’ve tried it have found that it’s too large and complicated a task – and too disruptive to the business – to try to do it all at once. Think of your legacy systems as important assets in the journey that may need reframing and refactoring to extend, but the main goal isn’t to retire technical debt; it’s to create customer value, and, most often, this is an incremental process. You need a plan. You need a strategy. And you need to work in a staged, incremental manner – like a rock climber – to avoid dead-ends that you can’t see yet.
See also: The Year Ahead: Trends in Digital Transformation
Visualizing and mentally preparing for your ascent
His planning and mental preparation are what gave Alex Honnold his edge. And it’s what gave him his confidence that he was prepared for any unexpected problems that arose.
How can companies engage in that sort of preparation enterprise-wide? If you’ve ever taken a psychology class, you know all about Maslow’s Hierarchy of needs: it’s a five-step guide to the pinnacle of true happiness and self-worth called “self-actualization.” And I’ve found it to be a useful metaphor to help corporate leaders – not just technologists – visualize how to manage their companies’ climb towards “digital maturity,” the business equivalent to self-actualization. Here’s how the two compare:
Level 1: The Foundation
- Maslow: Physiological needs – Essential biological requirements for survival: air, food, drink, shelter, clothing, etc.
- Digital: Enabling infrastructure – Unify the business upon a scalable enterprise platform to merge and synergize information siloed across the company. Experts agree a platform approach is essential to succeed in digital transformation.
Level 2: Safeguards
- Maslow: Safety and security needs – Protection from violence and theft, emotional stability and well-being, health security, and financial security.
- Digital: Security and trust – Besides the need for physical and cyber-security, companies need to have provisions to verify the accuracy and timeliness of information upon which they base their strategies and decisions.
Level 3: Interaction
- Maslow: Love and belongingness needs – The emotional need for interpersonal relationships, affiliating, connectedness, and being part of a group.
- Digital: Teaming and collaboration – Demonstrating co-ownership and sharing subject matter expertise across disciplines – especially technical and business communities – to optimize market-facing strategies and customer experiences.
Level 4: Synergy
- Maslow: Esteem needs – Includes self-esteem, accomplishment, and respect and acknowledgment from others.
- Digital: Organizational synergy – Information is democratized across the organization with all functional areas contributing to, and benefiting from, shared knowledge assets and goals.
Level 5: The Pinnacle
- Maslow: Self-actualization – The self-actualized person has realized their fullest potential, self-fulfillment, personal growth, and peak experiences that leave them enlightened and transformed.
- Digital: Full digital maturity – In the “actualized” organization, human domain experts and business leaders drive all strategies, decisions, actions, compliance, and governance… but all are dramatically accelerated and enriched by an enterprise platform that knows and is aligned with management intent and motivation per KPIs and business outcomes.
As you can see, Maslow’s Hierarchy presents an interesting parallel for strategizing a successful digital transformation effort. As with any strategic corporate undertaking, Maslow’s approach inserts milestones and checkpoints to check your progress, validate your efforts to date, and regroup for the next phase of the ascent.
Navigating around obstacles, dead-ends, and inclement conditions
When you are scaling a mountain – or a digital transformation pyramid – it’s just you versus the terrain. You control the pace, assess the risks, and manage the ascent pretty much on your own terms.
When Alex climbed El Capitan, it was a sunny day, with mild temperatures between 65-77⁰ F and a slight breeze between 6-8 mph: ideal conditions for his ascent. Conversely, companies in the midst of an arduous digital transformation effort are being pelted by the heavy rains and high winds being thrown at them by their traditional rivals, as well as emerging digital-first upstarts that are eating into traditional companies’ market share. For example:
- In banking, McKinsey estimates that fintechs will grow at roughly three times the overall banking industry’s growth rate between 2022 and 2028.
- In P&C insurance, Grandview Research projects that the global insurtech market will expand at a compound annual growth rate (CAGR) of 52.7% from 2023 to 2030.
Why are fintechs and insurtechs enjoying such remarkable success when, from the outset, traditional banks and insurers held all the advantages… like millions of loyal customers, decades of customer insights, and a broad portfolio of bundle-able financial products and services to offer?
The startups appear to have read The Art of War, where Sun Tzu advised generals to “avoid what is strong and strike at what is weak.” In studying their competitors, fintechs and insurtechs shrewdly determined that their traditional rivals’ biggest weaknesses – despite sitting on a gold mine of data – is that many haven’t succeeded in unifying their data to compile a complete, composite view of every customer. We call this hypersonalization: building and maintaining customer-specific strategies from every vantage point that deliver extraordinary customer experiences. It goes far beyond just marketing and knowing which products to push to which customers and when. It’s about creating a win-win customer relationship in which they are so delighted with your ability to anticipate and preemptively serve their needs that you – and every product and service in your portfolio – become an indispensable part of their lives. And it would be difficult for any competitor to par them away.
Fintechs and insurtechs realized this, and they were smart: they avoided a head-on, portfolio-level confrontation they knew they couldn’t win; instead, they launched fast, easy-to-use, niche digital apps that targeted a just single product line to pick off banks’ and insurance companies’ standalone products one at a time.
They mastered search engine marketing, digital customer acquisition, and delivering compelling, easy-to-use applications in real-time. And because their apps are designed for mobile, they are adept at snagging spontaneous banking prospects in real time, e.g., getting approved for a new car loan while on the car dealer’s lot. This helps them do very well with younger, mobile, tech-savvy consumers with no deep affinity to any one bank.
Staying on course, overcoming obstacles, and seizing the high ground
Though banks and insurers typically lag behind fintechs and insurtechs in terms of technology sophistication, they do have several potentially game-changing advantages:
- Established customer relationships
- A broader portfolio of product offerings
- Established servicing investments
- Years and years of rich customer information
But that last bullet – rich customer information – poses the most vexing challenge. Over the span of many years, companies automated departments and their applications on an as-needed basis, without regard for future interoperability. These departmental systems only improved the function of one slice of the business, leaving gaps and inconsistencies; the enterprise is left with some islands of solid data, separated by seas of fluidity and uncertainty. Because of this, legacy systems tend to:
- Run in fragmented departmental applications silos, separated from other IT systems
- Limit each department to its own separate view of the customer
- Manage customer and business strategies on a per-department basis
But each stage of digital transformation incrementally changes all of that once you have a unifying platform. As companies scale each level of their respective pyramids, connective tissue begins to form between their customer information, domain expertise, and new, always-emerging customer insights.
When supported by their platform’s AI, machine learning, and algorithmic analytics, these companies enjoy an “applied intelligence” solution that makes them more competitive by transforming their customer information into a competitive edge, synergized and mobilized for immediate customer-centric action wherever, whenever, and however, it is needed:
- All information assets interoperate seamlessly across all business lines, enhancing collective knowledge
- An enterprise-wide, 360-degree customer-centric view is maintained for each customer
- Precision-guided customer and business strategies can be simulated, optimized, and validated before they are enacted, for maximum upselling and cross-selling purposes
An enterprise decisioning platform provides a solid IT platform upon which to build towards full digital maturity.
The view from the top
Achieving digital maturity empowers companies to leverage the applied intelligence of their most seasoned domain experts, to ensure delightful user experiences across all channels, and to increase customer satisfaction, loyalty, and retention. This means that over time, customer insights incrementally grow deeper and more accurate with each iteration, resulting in increasingly higher return-on-decisions, as well as faster, smarter, and more profitable decisions over the lifespan of every customer relationship. This gives businesses the competitive advantage they need to beat their traditional and all-digital adversaries for the hearts, minds, and wallets of customers.
