The CRMKonvos gang had the pleasure to host a show with R “Ray” Wang, one of the most renowned analysts of topics Digitalisation to Digital Transformation around. Ray is the CEO of Silicon Valley based Constellation Research Inc. He co-hosts DisrupTV, a weekly enterprise tech and leadership webcast that averages 50,000 views per episode and blogs at www.raywang.org. His ground-breaking best selling book on digital transformation, Disrupting Digital Business, was published by Harvard Business Review Press in 2015. Ray's new book about Digital Giants and the future of business titled Everybody Wants to Rule The World will be released July 2021. Ray is well quoted, one of the most regarded analysts around and frequently interviewed in media outlets such as the Wall Street Journal, Fox Business, CNBC, Yahoo Finance, Cheddar, and Bloomberg.

And now he participates in a CRMKonvo.

With his new book about to be released, what better time is it to talk about what it takes to rule the world. Platform? Ecosystem? Guts? or just plain luck?

Well, as you can expect, Ray has some very distinct answers that he presents in his usual very convincing and vivid way. The digital giants rule, unless the playing field gets changed. How does it need to get changed? Well, listen to our CRMKonvo - and later read his book.

As a consequence of an organizational stuff up we had a CRMKonvo that was even better than could be expected in our wildest dreams. Our guests Sheryl Kingstone of 451 Research and Laurie McCabe of the SMB Group have a lot of data and insight to share about data driven experiences and what the digital maturity of companies small and large actually is. Do we talk digital transformation or just digitalization - even only digitization?

Will, whatever changes towards digital communication and collaboration stay? Will it change back to what it was? Something in between? Sheryl and Laurie have some very interesting data points and observations on these topics.

Two strong and renowned analysts - leading experts in their field - with different company focus and different approaches offer significant insight for us.

Great stuff. Enjoy

It's that time of year again. And although I'm not really into trend articles, I think it's time this year to start thinking about what's going on in the worlds of customer experience and customer relationship management – and how it's affecting businesses and customers. Especially since I was also asked ...

So here's my list of developments that I think will be relevant in the next few years, in quite random order, and admittedly not entirely without overlap.

Digitization - not Digital Transformation

If there is one theme that has and continues to permeate through the Covid pandemic, it is that of digitalization. The pandemic has painfully brought to light the failure to make necessary investments in consistent processes and technologies in the past. As a result, many companies continue to have processes that are characterized by media disruptions. The need to improve here is also the overarching theme for some of the other developments and trends currently evident.

Companies and their employees, as well as customers, have had to learn to deal with a highly distributed work infrastructure. Companies have responded by building communications infrastructures (zoom fatigue anyone?) and building out or rebuilding their sales and service infrastructures for increased remote capability. This is being done in 3 phases: First, as part of a stop-gap solution, an infrastructure was quickly pulled up that allowed operations to continue somehow. In the second phase, order was brought into the chaos thus produced. Now, in the third phase, more attention is being paid to integration and efficiency.

As a result, we will see more end-to-end digitized processes that address the needs of both customers who want to interact efficiently and effectively with businesses and those of a distributed workforce.

Mind you, I'm talking about digitization here, not digital transformation. The different meanings of these two terms I have described elsewhere

The death of the four P's is accelerating

Product, Price, Promotion, Placement. The four pillars of marketing are becoming increasingly indistinguishable and thus increasingly irrelevant. They will therefore be increasingly replaced by Customer Experience in order to continue to be successful. Companies will create a culture, supported by processes and technology, that enables their employees to consistently deliver positive experiences to customers across all interactions they have with the company. This will happen via companies refocusing on their core function: Helping their customers find solutions to their problems and offering them. To do this, companies will increasingly follow the pyramid of customer expectations.The pyramid essentially states that a company must first and foremost deliver reliably and accurately, be it information or solutions. The second level is about making this as efficient as possible for the customer, and the third level is about being as authentic and human as possible as a company.

But be careful: It is not about consistently overfulfilling the customer's expectations. On the contrary, it's about being as consistent as possible with your own brand.

Conversational is the new black

Several acquisitions in recent months have confirmed a significant trend toward changing the user interface for applications. Facebook bought Kustomer, Salesforce acquired Slack Technologies. Support applications are becoming more aligned with the conversational flow with customers rather than tickets as the leading entity. The steady and soaring use of Messenger systems has demonstrated this user trend for years. The most natural way for us humans to communicate is through speech - not pointing and clicking.

Now companies are following suit and also increasingly offering their employees and customers initially text-based and later also voice-based interfaces to the systems available. That includes combining them with video.

For efficiency reasons, these communication channels are being integrated directly into the application platforms and the Business Communication Platform is becoming part of the overall platform to increase employee productivity.

Work from Home becomes Work from Anywhere

2020 was the year that companies and their employees realized that it's not that impossible to work effectively even though you're not in the office. This insight was gained out of sheer necessity rather than conviction, as employees had to be enabled to work from home in a hurry. Necessary infrastructures, if not already in place, were hastily put in place. These are now gradually being made more effective first and then trimmed for efficiency so that they can support employees well (see also Conversational is the New Black). Nevertheless, employees will not work from the home office all the time for a wide variety of reasons. Now that infrastructures are set up and companies and employees have found that it works, it is indeed possible to work from a wide variety of locations. This option will increasingly be offered and used. In Germany, SAP, which has already allowed all employees to freely decide where they work from since 2018, is an early example of this trend.

Embedded AI with an explanatory component

Back in early 2017, I predicted a sharp increase in the commoditization of AI as a technology in my column on CustomerThink. AI and machine learning are not an end in themselves, but are there to help users perform tasks in the best possible way. This can be seen very strongly in the fact that AI techniques are already strongly embedded in business applications and offer users direct assistance or solutions, e.g., in evaluating accounts, leads, opportunities, or even in suggesting so-called 'next best actions' in a wide variety of areas.

The problem here is accountability and trust. Users are always responsible for their actions, but want to rely on the predictions and suggestions of the system. However, this is difficult to achieve in a black box that is an AI. Learning from experience simply takes too long in a world where quick wins are necessary.

At the same time, AI technologies are becoming increasingly commoditized by being embedded in business applications. 

Therefore, more and more AI-enabled systems will have an explanation component that allows users to evaluate the system's predictions and suggestions.

The age of the Customer Data Platform and the 360-degree view of the customer - Sigh

One of the buzzwords that has increasingly emerged in 2020 is that of the Customer Data Platform as a vital component of a system landscape. The corresponding systems certainly have their raison d'être in a corporate cloud world increasingly made up of organizational and data silos, to enable companies to respond properly to customer needs in a given situation, or even to take proactive action. However - and hence the sigh in the headline - they are not the "silver bullet" they are often offered as - nor are they a goal in themselves (see also the next point).

Closely related to this is the notion of a 360-degree view of the customer. Nobody wants that. Really not! Just imagine this logically: Actually, one always looks only at a part of the whole.

What is actually desired and necessary is the ability to use (the right, out of the many that the company has accumulated) existing data to offer the customer, ideally in real time, a solution for the current need.

This requires a comprehensive, consistent, time-dependent data set about the customer, from which, covered by the customer's consent, the information that is currently relevant is determined and used for the customer's benefit.

The creation of this comprehensive customer database from many sources and its utilization for all departments is the task of a CDP. Since, as mentioned, too many non-integrated systems exist in companies, another system is needed for the time being to fulfil this task as the core component of a customer experience platform, as shown in the diagram below (with a focus on customer-facing applications).

Which brings me to the next, and more comprehensive, trend.

The boundaries between CDP, personalization, real-time interaction management, and customer journey orchestration are blurring.

A variety of different applications have evolved in the martech stack, but orchestrated to meet a business objective: We have a CDP that divides customers into segments so they can be targeted according to their current interests and consents. The merging of customer profiles created in this way with answers/products/services (content) relevant to the customer takes place using a personalization engine. Providing the determined content at the right time on the right communication channel is the task of Real Time Interaction Management (RTIM) when the customer is moving on digital channels. Each of these interactions is a step in an individual customer journey. A customer can be on several of these journeys with the same company at the same time. Identifying and optimizing these customer journeys is the task of a customer journey orchestration engine. Optimization must be seen through the eyes of the customer - not the company.

At the moment, all of this is often implemented by a wide variety of systems, some with overlapping functionality. This will change to the extent that the separation between these individual systems will increasingly dissolve and they will become more and more modules of a whole. This trend is already evident with some manufacturers, also as a reaction to the fact that this is being demanded more and more so that system landscapes do not become excessively complex.

Efficiency becomes more important again

After a long period of uninterrupted growth, we are seeing declining, and in some cases even collapsing, sales at companies for the first time in years as a result of the Corona pandemic. At the same time, the disappearance of traditional communication and sales channels is increasing the need to invest in digital infrastructures. These are investments that have suddenly become urgent; investments whose importance was not so clear to companies before.

However, many companies now lack the financial freedom to invest for the long term. Therefore, every single investment and process in the company needs to be examined even more closely to see how it/they affect the company's ongoing revenues and what the RoI looks like. Actions and investments that have an (almost) direct positive impact on cash flow, revenue and profit are gaining in importance. Companies will invest more where they see the famous easily achievable fruits and where efficiency can be gained quickly. This is a concept that Constellation Research analyst Nicole France very aptly calls "revenue operations."

Marketing and sales merge to become customer engagement

It's the old familiar song: sales complains that no leads are delivered from marketing, while marketing is always surprised that the leads generated are not picked up. One reaction in the B2B environment to this has been to establish an account-based marketing (ABM) approach, which has two effects.

First, potential customers are targeted with information that is directly tailored to their needs and challenges. Second, ABM provides the first dovetailing of marketing and sales. While this approach only scales to a limited extent, it points in the right direction.

The big step is to bring marketing and sales together into a 'Customer Engagement' department, working hand-in-hand with the goal of winning customers by creating value for the customer and a common set of KPIs. This requires an increased outside-in view of companies and processes and ultimately leads to winning more customers by giving them more value early on. This effect can then be amplified by early involvement of deep product or consulting expertise, which a customer engagement team by its very nature does not have.

E-commerce becomes any-commerce

This trend is related to the increasing merging of CDP, personalization, real-time interaction management, and customer journey orchestration that I described above. The path to Any-Commerce is ultimately a logical consequence. The main channels for (B2C) sales to date have been the brick-and-mortar store and the e-commerce presence. In recent years, mobile applications have also been added to a large extent. Messaging and social media as well as external sales platforms are increasingly becoming a part of the channel mix. It will become increasingly irrelevant on which of these channels a customer journey leading to a purchase is started, continued and finally completed.

Of course, this will also have an impact on processes that are not usually associated with customer experience: Warehousing as well as Logistics, as this splitting of channels makes a centralized view of merchandise management more necessary than ever.

All of this, in turn, is a driver for another trend.

Front and back office are merging – finally

More and more companies understand that interacting with customers in a meaningful way requires more than just a front office. As you can also see from the discussion around CDP and the infamous 360-degree view of the customer and the increasing importance of customer experience, this separation tends to be seen as artificial anyway. It is a relic of the days when there were only ERP systems that related to the inner workings of companies. Modern platform architectures and data models harmonized between applications to model business objects ensure a smooth flow of information between departments, applications and between companies and customers.

IoT and Customer Experience

Last but not least, a technology topic that at first seems to have nothing to do with customer experience: Internet of Things, or IoT for short. However, a direct connection can be made via the detour of artificial intelligence. The number of "things" in the network is growing steadily and strongly. Apart from their data collection qualities, many of these devices serve to simplify or improve life for customers, mostly end customers. Be it automatic vacuum cleaners, health applications or sports equipment, even clothing, the Internet of Things is steadily making its way into our lives. One of the goals here is to enable a better experience with the help of the device. I'm sure you're thinking about privacy and data protection now? I'll get to that now.

Bonus Trend: Privacy and increasing compliance with the EU DGSVO

In May, the DGSVO celebrates its second birthday after an incubation and preparation period. Surprisingly, many companies have not yet or not sufficiently taken care to stand on a stable foundation in this area. Even now, we often see attempts to trick consent (marketing consents are active by default) combined with the generation of significant effort on the part of a website visitor to avoid the various tracking cookies that are supposed to be set.

The good news is that more and more companies are actually starting to rethink and change their data collection. It doesn't matter if they're starting because they've seen that the DGSVO isn't a toothless tiger or because they realize that a more customer-centric strategy of using consent and preferences is more purposeful. Negative headlines such as the Bluekai data scandal last June, as well as browser vendor initiatives to prevent cross-site tacking in browsers as well as mobile apps, probably do the trick. 

The good news is that it's happening!

What trends do you see? Let me hear your thoughts, via Twitter or LinkedIn.

Since about February or March of Anno Domini 2020 we regularly hear about how the Covid crisis is driving “digital transformation”. You now might ask yourself why I put this term into quotes. Bear with me for a minute, it’ll be explained …

For sure, this crisis is forcing many a company into enabling its employees to work remotely. It also forced some companies to at least temporarily close physical doors as supply chains and/or delivery of products and services are severely inhibited or even broken. We also see a lot of companies implement interesting hybrid strategies that bring what we thought of being decidedly offline experiences into the online world.

A good example for this trend are wineries that lost an important lead generation and sales channel with their temporary inability to host wine tastings in their cellars. Till now the opinion was that nothing can beat the experience of being down there in a wine cellar, surrounded by barrels of ageing wine, musty air, like-minded people and a connoisseur that explains the wines, their provenance and their characteristics.

Still, some of them have transformed the experience they deliver during wine tastings into a combination of offline and online experience. Wine gets selected by the customers, an appointment for the tasting is made, and the wine is wrapped into some nice packaging, along with some information, and sent to the customer. The tasting itself then is supported by platforms such as Virtual Wine Tasting, Tasting Room, or Cheerswithme. The experience might not be the same as at the winery, and it shouldn’t. Instead, it offers something that a pure offline event cannot offer, either: The ability to taste and try very different wines in a community, without leaving home, and supported by an expert, maybe even as part of an overarching event.

Another example: Some, mainly smaller local retail shops, looked into the Amazon playbook – on a far smaller scale, but still.

Not being able to allow customers into their premises, they started to place their phone number on the door to be able to accept orders while they were building their web shop, first as a stop-gap solution, then replaced by something more powerful. Delivery initially started as simple as using the owner’s car – again, to be replaced by something more powerful.

They evolved their business model.

Other companies that I look at, support their service centre by implementing a conversational AI, starting with simple self-service and marketing scenarios, planning to extend these into more sophisticated ones.

Yet other ones are optimizing their quotation process by extending the scope of their existing sales force automation system from opportunity, account, contact and activity management into the quotation process, therefore reducing technology breaks.

These are four very different examples of actions taken by four very different types of companies.

And now we are coming back to “digital transformation”.

Are these companies undergoing a digital transformation after all?

And even more broadly: What is a digital transformation after all?

These are interesting and important questions.

And not simple to answer, let me tell that.

To begin with, let me do some definition work, for the sake of clarity.

Does it matter to define?

Sure as! And here is why.

A little communication theory – or is it information theory?

Well, actually communication theory is a subset of information theory, but this is not the topic of this excursion.

Both are pretty complex topics that I am going to simplify quite a lot to make my point.

Communication is mostly about the mutual exchange of information between a sender and a recipient. They use a communication channel, and they both have their own frame of reference, which they use to encode and decode messages.

Sounds pretty techy, doesn’t it?

So, let’s look at people. Important communication channels to convey information between two people are the written and the spoken word. The words are encoded in a language, say, English. All of us have a different command of this language, even if we are native speakers. English is not equal to English. Means the channel (written or spoken word) itself does not guarantee that the meaning that the speaking person wants to transport is what the listening person hears.

If that wasn’t already enough: The frames of reference of our two people are defined by many things, including their upbringing, their culture, origin, gender, the relationship they share, even their mood. Let’s call this their contexts.

Most people share parts of their contexts; this means their contexts are not mutually exclusive – luckily, or else communication would be impossible. However, these contexts differ. This, in turn, means that, even if the listening persons hears exactly what the speaking person says, it will likely be interpreted differently.

The result? The result is a misunderstanding.

One way to reduce the likelihood of misunderstandings is to define terms. Scientists are doing this all the time. All for the sake of being precise.

People use the same terms all the time.

So, yes, definition matters.

Back to the topic

Many people, including myself, are talking about businesses undergoing digital transformation. I am convinced that none of us has the same picture in mind when we are using this term, or digitalization, or the slightly shorter one that is digitization. We sometimes even use them interchanging.

But are they the same?

Let’s dig into it and see – and start with what Wikipedia has to say, coming to an own definition, if necessary.

And trust me, it is necessary. Wikipedia relates digitization to information only, digitalization to industries and organizations, and digital transformation to whole societies.

This is not exactly helpful in the context of businesses, as it means that a business cannot undergo a digital transformation – unless one looks at it as a society, which is probably too bold.

So, here we go. Let’s keep the notion of customer experience in mind and define!

Digitization

Wikipedia defines digitization as „the process of converting information into a digital (i.e. computer-readable) format, in which the information is organized into bits. The result is the representation of an object, image, sound, document or signal (usually an analog signal) by generating a series of numbers that describe a discrete set of points or samples”.

Well, that’s quite a chunk, but in line with what the Oxford English Dictionary (OED) says. So, let’s digest it and reduce it to its core.

Digitization is the process of converting analogue information into a computer readable format.

A good start; it gives the what but is missing the why. The definition is about data, not process, therefore the reason for digitization is process efficiency.

Therefore, my definition of digitization:

Digitization is the process of converting analogue information into a computer readable format with the goal of improving existing processes.

Or in other words: Digitization is about doing things better.

Digitalization

Interestingly enough, Wikipedia redirects digitalization to digitization, suggesting that these terms mean one and the same. On the other hand the term digitalization is covered to some extent in the article about digital transformation. According to that article digitalization is a “technologically-induced change within industries, markets, and branches” that “has enabled new processes business models services ”.

The OED relates digitalization to “the adoption or increase in use of digital or computer technology by an organization, industry, country, etc.”.

This, again, is in line in the sense that digitalization seems to be about process. These processes can rely upon digitalized data but also on (natively) digital data. If they create data, it will be digital. So:

Digitalization is the use of computer technology on top of computer readable data to create new processes that provide better business outcomes than the original ones or that have not been possible at all without the use of computer technology.

In brief: Digitalization is about doing better things.

Digital Transformation

According to Wikipedia, digital transformation is “the use of new, fast, and frequently changing digital technology to solve problems”.

Now you know it, don’t you? At least you now know why this article is flagged for having multiple issues … by the way, quantum computers are ruled out by this definition, as they are not working digitally.

So, let’s have a look at what the Gartner Group says: A “digital business transformation is the process of exploiting digital technologies and supporting capabilities to create a robust new business model”.

What the Gartner definition makes clear is that digital (business) transformation is not about implementing technology but about transforming the whole business: It is a business transformation that is targeted at creating new business models, and being able to adapt to a changing environment. Abstracted away from businesses, the results of a digital transformation are new and different outcomes. To be able to get these new and different outcomes, the  transformation builds on the power of computers, algorithms, and data. To be possible, a digital transformation requires an outside-in view, while technology is a mandatory enabler. Digital transformation inherently is disruptive.

Looking into this, my definition of digital transformation is:

A digital transformation is an organizational transformation that covers organization, values, culture, mission and vision, using an outside-in view. It is enabled by computer technology. Through this combination, the organization can provide new solutions for problems or solutions for problems that could not be addressed before.

In brief: Digital transformation is about doing entirely different things.

Now, back to the original question

Does the Corona-crisis accelerate digital transformation?

Looking at the definitions of digitization, digitalization, and digital transformation, the answer is a clear no.

Let’s summarize:

• Digitization: Doing things better.
• Digitalization: Doing better things.
• Digital transformation: Doing entirely different things.

What companies are dealing with are digitization and digitalization, being able to do things or do them better.

A digital transformation is a complete reinvention of the business, which is disruptive in nature. While a few might choose this way, the majority does not.

Final thought: Which opens the door for disruptors …

What do you think?

• First of all: They must not be part of the problem.
• They need a relentless focus on solving real business problems with technology.
• They need to deliver easy and simple to implement solutions to these business problems.

Don’t be a part of the problem

1. Normally, the cost comes before the value can get harvested. This was true in the old days of on premise software and is also true in a subscription economy. The fee is to be paid. And consulting, e.g. the implementation of business software, is usually paid by the hour.

2. Especially after a crisis the clients may not be able to invest enough to be able to get significant value out of the investment. This even happens at the best of times. How many projects needed to get stripped down so much that software users feel the urge to circumvent the newly implemented processes? It happens all the time.

Focus on solving real business problems

Deliver easy and simple to implement solutions to real business problems

Call to Action

• There is no costly sales organization. The own sales happens purely inbound. Channel partners may have an active sales force, but Zoho itself works inbound (at least for the SMB market, more about this topic later).
• Zoho is relying entirely(!) on its own infrastructure. Not only is the company running own data centres with custom built servers – instead of following the rush to use a hyper scaler – but it also owns the complete software stack, including all services such as machine learning and database, to name but two. Historically, the company also can do monitoring of services, which comes in quite handy following this (at the outset not so intuitive) strategy.

A word about culture

And a word about strategy

• Zoho has developed its whole soft- and hardware stack. The software is not running on a public cloud but in own data centres. Except of a few open source libraries that it uses, the company develops all its code itself and builds the necessary skills (e.g. when it comes to data science and machine learning).
• Zoho does not position itself as a software company but as a platform company
• Zoho wants to provide value at low cost and ‘not become a cost factor’ for its customers

Finally, a word about people

My Analysis and Point of View

1. From an organizational point of view the strong focus on inbound sales needs to be augmented by an outbound sales channel that focuses on selling to enterprises.
2. Functionally the company needs to improve upon its end-to-end support by increasing its ERP footprint in order to stay credible as a platform player
3. Already having an ecosystem of partners, this might get even strengthened to support overcoming the above challenges

The organizational challenge

End-to-end processes

Ecosystem

Famous last words

• Look at account fees, or fees for withdrawing from or depositing moneys to your accounts. These are still far too common
• Ever tried to do an international money transfer? Not only are these usually slow, but also very expensive. On top of that banks regularly make you agree to a clause that any loss of the money is your problem, not theirs
• Investment advice is regularly favouring products that provide a high commission to the bank, while you are made to sign forms that basically remove the bank you are dealing with from any responsibility
• Changes in reference interests are regularly treated in two ways: If they go up, the rates customers have to pay go up almost immediately; if they go down, things move at a far more leisurely pace
• The GFC, that started as a mortgage crisis, and how many mortgage banks treated defaulting customers, is a story all of its own

What is needed?

• Having money in accounts safe and secure
• Being able to easily open up an account
• Being able to transfer moneys fast, easily and reliably at competitive rates
• Getting a mortgage at competitive rates with no major fuss
• Receiving competitive interest rates on their savings accounts
• Receiving reliable and accurate service whenever needed

• Released its first release of S/4HANA for Customer Management
• Acquired CallidusCloud, a software company that focuses on sales enablement
• Announced a new ERP licensing model ‚for the Digital Age‘

S/4HANA for Customer Management

CallidusCloud Acquisition

New ERP Licensing Model

My PoV and Advice

1. One can look at S/4HANA as mutating into a transaction engine. The SAP Hybris Revenue Cloud is well geared towards creating correct invoices, based on created ‘documents’.
2. SAP Hybris CPQ is on its way to retirement. It is an engine and not really cloud enabled. For variant configuration it bolts on the digital core. And configuration is not a business document in my books. The order, that holds the BOM that is generated by configuration, is.
3. Callidus is not yet strong in variant configuration but can be bolted on the digital core, too, in order to support variant configuration. SAP needs only one engine. Callidus is intended to be this engine. In case there is a continued need to have a separate variant configuration capability there is still In Mind.
4. There will be continued efforts to put all engagement functionalities – customer, supplier, employee – into cloud based applications that surround the digital core.
5. As a side effect, life might become easier for ISV partners, as there is no indirect access risk anymore.

The News

The Bigger Picture

My PoV and Advice

A little Recap

2025. Opens a future roadmap for current SAP CRM customers that stretches beyond 2025. These customers else are at risk of defecting.
2026. Provides the continued chance for customers to run their SAP instance on-premise. According to Volker there are still a good number of customers that do not want to run their instance in the cloud. The key word here is choice.
2027. It simplifies the system landscape and its operation

Now What is Going On?

2017 – The Year of Service Functionality

2018 will be the Year of Sales Functionality

Is 2019 the Year of Marketing?

How is SAP Doing It?

But What about the UI?

My Take