Digital channels and their role in successful product distribution. How to use them more effectively?
What are the most common causes of low performance of digital channels? How should companies think about them in order to use their full potential and why is it important to be able to adapt the internal organizational structure to them? Oldřich Kotas from Trask, an architect with a focus on digital channels and customer process innovation, answers more than just these questions.
At this year's Trask Future Insight 2022 conference, you emphasized that a digital product is never finished and therefore requires continuous investment in its optimization and in the digital transformation of the company that offers it. Is this approach common place in companies today?
It certainly is not, but it cannot be simply generalised. It always depends on the context of the company, the subject of its business and the global scale. There is a big difference between traditional industries that focus on services or products that have been around for, say, a century and are now digitising their products, and startups that are building on digital business from the ground up.
So how do traditional industries typically approach optimizing services or products that used to be offered primarily physically?
Distribution of such products has historically been optimized through the original parent channel. For example, in the insurance industry, in the past, an employee or advisor in charge of offering and underwriting insurance had to go around the village, collect signed contracts, take them to the post office, send them to the head office, which processed the contracts and sent them back. So for over 150 years the service was based on face-to-face communication, which naturally influenced the way these companies thought about product distribution. But as we move into the digital world, we can no longer think about it the same way. It requires a change in the service or product offered, new ways of distribution, meeting all the legal requirements and finding an effective way to keep the customer's attention in the digital space.
We are talking about building a relationship with the customer in the online world. Why can it be harder for traditional industries to change the way they think?
Basically, we're hitting on the philosophical concept of the industrial age, which is based on building a factory with a focus on the belt production of a commodity. You couldn't interfere too much with the belt production so as not to reduce its efficiency, so the main thing was to see if it was running like a well-oiled machine. It was similar in other industries and to this day it is not desirable to change the status quo.
So this approach still survives, even though we have been talking about digitalisation for quite a long time.
Exactly. On the other hand, with a dedicated startup mentality, it's not infrequent that the "business as usual" doesn't work for the sake of agility, or at the very least, fails because the company has gaps in its day-to-day service delivery, dependent on functional established processes.
Is there an ideal example of a company that can continuously improve its products without compromising its stability?
It works best for companies that have digital product in their DNA. In the Czech Republic, I can think of Avast, which focuses on cybersecurity. As cyber attacks are fluid in nature and constantly increasing in quantity and quality, they are forced to constantly optimize or even completely rebuild their products. They operate in an innovative mode, where they test a new feature or product, then develop and extend it further, then set up another hypothesis to test, and operate in this way continuously.
What is the most common problem for companies seeking quality digital products and high performance digital channels?
The difficulty is a fragmented organization and corporate (not only) IT architecture that are not built to address other parts related to digital channel performance. Marketing, customer service, sales, channels, products, risk, compliance and everything else often operate in isolation - at least at the level of thinking and goals. Therefore, the solution requires a deeper change in the organization that should be driven by a customer-centric approach. But most companies are organization-centric, not even product-centric, which is what they consider themselves to be.
What does this mean in practice?
It means that they cannot offer a comprehensive service and provide a quality customer journey to the client even based on that product. Or they fail to service a given service well throughout its entire lifecycle - from raising awareness of their product among potential customers to targeted marketing to onboarding and service processes tied to cross-sell and up-sell. Marketing departments make campaigns and assume that they have to reach a certain percentage of people. Managers then look at the profitability and risk of the products, but affiliate networks are again dealing with a different performance and are driven by a different brief and so we could go on. To meet customer demands, individual departments need to work together towards a common goal and not just focus on their part of the agenda and out-of-sync KPIs.
Are poorly set productivity metrics the reason why companies are not using the full potential of digital channels?
This principle is why companies often stop developing a product at one point. If KPIs are not built on continuous optimization and quality improvement, digital products will start to lag behind the competition. Among other things, there is a lack of perspective to show the benefits of digital channels even for the traditional ones, as they often function primarily as a very effective lead collection, even though the actual performance may be low, or their deployment will help to break the bottlenecks of the traditional ones. And the aspect of continuous comparison with competitors' quality and current best practices is definitely missing. Because the release has already taken place once, and thus we are done. It is of course fine to track sales and profit, but it should not be the only indicator of success.
In the Czech Republic, banks are the furthest along in this respect. Why have they been the ones to grasp this opportunity the best so far?
Czech banks are practically the furthest along in digitalisation in the whole of Central Eastern Europe and much of Western Europe, as confirmed by Gartner. I think that several factors play a role in this. The first is the available investment funds, which are orders of magnitude higher in banks than in small organisations. Then there is the ability to innovate, and naturally there is also peer pressure, or in a way, high profitability in our market, which gives room for manoeuvre and also creates pressure for retention. Last but not least, I think it is our playful national nature. In the digital world, companies in a given industry do everything the same for a long time, but then someone comes along and starts pushing it further - banks have transformed their services in waves like this, starting with the first digitalisation at the turn of the millennium and ending with the advent of digital brands like Air Bank. But the most important thing at all times is strong vision and leadership.
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