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What is digital transformation? Finding an answer to the big question

Throughout my career, I have often been asked what digital transformation actually is. Sometimes the question comes from wanting to understand the actual process, but more often the impetus comes from a need to understand what the business implications are for people and companies outside the IT sector.

As the term gets used more and more, the propensity for every little thing to be painted with the “digital transformation” brush expands.

I have seen definitions for digital transformation cover a wide range – from replacing a manual process with an online software platform, through to fundamentally changing the direction of a company, including taking advantage of a digital market leadership position.

There are plenty of practitioners out there spending time sorting out what digital transformation isn’t. But the weekend barbecue conversation test requires that you’re able to succinctly explain what you do in a way that means something to the listener and doesn’t invoke the response: “Hey, would you be able to help me out with this email problem I’ve been having…?”

A strict, but not so meaningful, definition

A formal definition suggests that digital transformation refers to customer-driven strategic business transformation that requires cross-cutting organisational change as well as the implementation of digital technologies.

Try saying that at a barbecue and see if anyone is still standing!

To help explain digital transformation from my perspective, especially to analysts and investors, I have taken the path of creating an example company that is in need of digital transformation, and how going on this journey helps them. I call this company “Insureco”.

Insureco and its challenges

Insureco is an insurance company that services customers who might need a range of insurance cover – including car, household and travel – or just one of these.

Insureco is typical of many insurance brokers – they provide policies to their customers from a range of other insurers and underwriters. They have a good reputation among – and long term relationships with – their clients, many of whom keep coming back for repeat business whenever Insureco reminds them to renew their policy with a renewal notice in the mail.

The customers expect that Insureco understands their needs, tracks down the best policy in terms of price and features to match, and procures it for them. They expect Insureco will be there to help handle claims should the worst happen.

But Insureco has a number of challenges.

First, it relies on word-of-mouth and referrals to get new customers, or to remind existing customers that there are other policies on offer – during that once-a-year renewal interaction.

At the same time, those customers, and prospective ones – especially younger buyers with no loyalty to Insureco and looking to engage purely digitally – are being bombarded by advertising from the big guys, and being offered innovative products and bundles that lure them away from Insureco.

A customer lost is a customer probably gone forever. And if new customers aren’t found to replace those lost, Insureco will be in decline.

Currently, when customers want to change their details, update their cover, get a new policy, or generally find out something, they need to call Insureco during Australian business hours and wait in a phone queue to speak to an operator.

Insureco’s website is helpful with explaining generic policy information and providing a phone number, but with little else.

And finally, when customers need changes to their details, a claim chased up or a new policy set up, Insureco’s helpful and well trained staff need to follow manual processes to make it all happen once they receive a call, even though some of the communication might happen by email.

The transformed Insureco

The digitally transformed Insureco will do business differently. To start, it needs a digital operating model, which is fundamentally different to today’s traditional, people intensive manual model.

Such a model would turn the business around so that the customer is at the centre of the information model, even before they become a customer.

The customer’s desired methods of transacting with Insureco will drive how processes are built, automated and scaled. The knowledge Insureco gathers about customers from the start of the relationship help the company offer customers products and services they need, when they need them.

With automated processes, customers enjoy faster, more accurate turnaround of their requests, and dramatically shortening the time for a given transaction saves on resources and makes customers happier.

In many cases, information updates or detail changes can be placed directly in the hands of customers who can do what’s needed on their own at any time, and don’t even need to call.

Best of all, while the customers are interacting, a health check on their insurance cover could unearth the opportunity to sell them other policies, or fine tune the ones they have to meet their needs. That’s what anyone would call great service!

The story about how a digitally enabled version of Insureco differs from the current, traditional one in purely business, and not technical, terms is effective in explaining to folks what digital transformation is all about.

  • Anthony Woodward is founder and Chief Executive Officer of Accelera