Demystifying 'Digital Transformation'

Digital Transformation has become a buzzword. CXOs are not happy if the ‘Transformation’ word does not appear in every slide of their presentation to the board!! However, if asked, every CXO will provide a different perspective on their understanding and expectation from ‘Digital Transformation’. In common error, most of them gets confused between ‘Digitization’ and making everything digital.

Digital & Transformation- both these words have deeper meanings and multiple reference points. While digital is better understood, transformation is not. Let us try to find out what exactly ‘digital transformation’ means and how it changes the business.

In last 80’s and early ‘90s corporates started digitizing their operations by capturing transactions, reference and master data records, validations, accounting and book keeping activities in digital form using software and systems. Advent of Core Banking (CBS) & ERP systems helped organization to capture the end to end process of a business transaction, both financial and non-financial into a record keeping system. The system referred to master and reference data elements like branch code, employee code, product code etc. to validate these transactions. These systems were also designed to keep history of these transactions using reference codes which helped the organization in tracing old transactions, aggregate transactions, making adjustments after transactions were completed etc. Overall these systems provided convenience of doing business easily using a system of records which captured all happenings in the organization. While the CBS worked in banking space to capture all customer and internal transactions and communications, ERP systems started capturing, processing and settling whole resource management activities starting from supply chain, invoice management, order management etc. This was the digitization of business and we have seen this across Indian corporates starting 25-30 years ago.

Subsequent periods saw further enhancements of these systems where they started capturing more details, linking transaction references, creating validations etc. This helped the organizations in their book keeping as well as audit process. They also helped them to easily generate reports and point in time statements as and when required.

Early 2000 saw advent of analytics using these transactional data where organizations were looking for deeper insights into their business across multiple dimensions like product, branch, customer, channels, sales methods etc. To support this multi-dimensional reporting requirement and also to continue to support need for more data capture, CBS and ERP systems adopted newer methods of development around ‘Serviced Oriented Architecture- SOA’. Business services were becoming complex and making changes in underlying transaction systems were time consuming, required high efforts and technically complex. The SOA changed the game and helped the systems to be more agile and adapt to fast changes. This was digitization version 2 in the corporate world.

However, one key aspect was missing in this whole exercise. The need of the customer was not always properly looked into. It was all done to bring in efficiency in operations by reducing response time through information retrieval. 2008 and beyond started changing the way customer service is to be managed and we started hearing ‘transformation’ more often.

2008 and beyond saw a major shift in consumer psychology. With internet becoming more common and access easier, common people started experiencing a never found freedom. They need not wait for others to provide insights into the clarifications they are looking for. This started bringing in the concept of ‘self- servicing’ and becoming self-sufficient. Changing life cycle and time pressure forced people to move from the discomforts of physical world interaction to a more comfortable digital world, where they themselves can look for options to complete their work at their leisure. The biggest thing which drove this was ‘Freedom’ of doing work at own space. While, at the customer side it enabled the customers to do their work at their own time and space, for the provider of services e.g. banking, insurance, mobile, entertainment etc., this was a major challenge. The mitigation of this challenge of allowing users and customers to own their communications and transactions with the corporate entity is the biggest change ever thought about. It started as simple IT systems integration to make customer initiated transactions self-sustained and self-complete, but sooner the organizations realized it is not making the users/customers happy. They needed something big, something to completely change the way the interaction happens and get maximum satisfaction for all concerned. They needed a ‘Transformation’.

 As the grammatical term of 'transformation' means- ‘The businesses needed a marked change in form, nature and appearance’. That’s where we started hearing about Transformation using Digital technologies and the new term emerged ‘Digital Transformation’. The early part of year 2000 saw the organizations making changes in their business format itself under the various ‘Business Transformation’ initiatives.

The transformation requires not only the entity to change but also to change the whole eco system they work with. We have seen many examples where the eco system change was not planned and the benefits of true transformation was never fully realized. Let’s take a real life examples:

 A new, highly sophisticated airport terminal has opened. This is expected to provide the passengers the best in class amenities and services. Now, the problem is, the surround eco systems changes were not planned e.g.

The connecting road and rail link to the terminal building has not been established

• The terminal does not have good food courts and shopping experience
• The terminal does not provide ample parking for visitors and passengers
• The terminal building does not have toilets and other amenities for visitors
• The terminal has no walkway from the parking to the building to carry big luggages
• The terminal has not provided good mobile connectivity due to lack of mobile towers
• The terminal does not have any green cover
• The terminal has not provided enough self check-in kiosks
• And many such

 Now, even if the passengers start using the terminal and its state of the art experiences, they will never experience the benefits as all surrounding eco system is limiting the best experience. The airport has failed to bring in the whole eco system change to enable the passengers to experience the best.

This happened for many such large IT projects where the anchor solution like the CBS and ERP have been changed without impacting the surround applications. Thus the whole target of bringing in a complete change in customer and user behavior has failed.

Today’s banks & other large corporates are trying to drive the transformation using the digital transformation and thus the two words got connected as ‘Digital transformation’. It’s nothing but to change the existing way of doing business and making the users and consumers more self-sustained and thus bringing in required process changes to support this digitally. The digital inclusion takes out any manual intervention of doing an interaction or transaction and thus makes the whole thing self-sustained and to be done at own time and leisure. The organizations are working to change not only the core systems but also all surrounding eco system to bring in this transformation by changing

•  Customer experience- so that they feel comfortable and confident to perform their own tasks
• Work place- so that employees can seamlessly interact with each other to share insights and distribute part of processes for completion
• Business- so that the business recognizes and validates these self-sustained transactions to continue and satisfy the required conditionalities associated e.g. a bank account opening, a loan account disbursement etc.

  Now let’s try to put these into a real example in the operations of the bank.

 Customer Side Story:

Stage 1: Query and Response Initiate

The prospect of a banking product visits a bank website and likes the offering for car loan. However, she needs to discuss with someone in the bank to check the following:

 Is she eligible for a car loan with her current earnings?

• If yes, what is her limit for loan?
• What are the documents she needs to provide to get the loan approved?
• A loan or a financial lease will be good for her benefits?
• Can she change some of the terms and conditions of the loan stated in the website?
• Timeline to get the loan approved and money released?
• And many such 

Till few years ago, people were calling the bank call centers or writing a mail to customer care to get these answers. Today we have facilities like Chat Robots and Video based advisory on these.

Stage 2: Initiate & Approval

She now got all the information she is looking for and have arranged for all required documents for opening a loan account. As next step, she goes to the bank loan portal and completes filling up of the form and also uploading the required documents. The portal accepts all the documents and issues a digital token to her in the form of a QR Code, released in her official mobile registered in the loan application. She can also log into the portal using her social media profiles like Twitter and Facebook and link her profile with this bank account.

As part of regulatory compliance, she needs to also submit all these electronic documents she uploaded in the portal in physically signed form. She goes to a nearest bank branch, kiosk and scans the QR code against the kiosk, starts depositing the documents in a sealed envelope and gets an official receipt.

Next day she gets a full set of all documents including the loan agreement to be signed and returned back. She also gets a prepaid postage envelope to send back the signed copy of the agreement.

Stage 3: Completion & Disbursal

The loan is now approved and shows up in the portal. With her login she now authorizes the payment or disbursement of the amount to the car dealer. Once the disbursement happens, she gets a conformation mail and message and also the invoice from the car dealer uploaded into the same portal. The financial transaction is completed.

Stage 3: Feedback & Advocacy

Now the customer has got what she was looking for and very happy with the operations. She now provides a good feedback to the customer service team using the website and also writes positive comments about the whole experience on social media.

She is now a trusted customer partner of the bank which the bank can use as a reference.

Business Side Story:

While the customer was enjoying a nice experience where she was able to get all required information and process support, the business needed to support the whole back end process.

•  Website with chat Bot and Video banking
• Online portal to capture documents and support generation of QR Code and other tokens
• Connected Kiosks to accept physical documents and provide receipt
• Back end processing team to seamlessly get the electronic and physical documents with customer details to create new customer and open a loan account
• Back end process to validate, approve and inform the customer. Also populate all details in the portal using a workflow driven system
• Fetching social media data for analyze purchase pattern, behavior and credit worthiness. Also social media data to find out more about her peer group who may be also interested to similar products.
• Back end processing to accept vendor invoice attached to the loan, validate authenticity and physical verification
• Cross functional back end processing team comprising customer service, CRM, Loan department, risk management, credit approvals, disbursement, vendor management etc. to work in complete sync using the same workflow driven origination and loan management system

This whole thing is a major eco system management, which we spoke about. Any one missing link, will not only kill the process unfinished but will also create and leave a dissatisfied customer.

As part of the ‘Digital Transformation’, this bank now needs to integrate the back end processes with multiple input points, integrate multiple systems, bring in new technology to enable auto movement of the process to next step and aligned human intervention at required stages. This brings out the whole eco system to work together to make the experience better and ask for repeat of similar experience. The customer will now think twice before shifting to another bank for her next purchase.

This is what is ‘Digital Transformation’ in its simplest form and meaning.

Let us speak about the comfort and satisfaction each service provides wants to provide to their customers. Once we know these, the design part of the transformation is a much simpler discussion.

We will talk about implementation at subsequent period.