CX as a Starting Point for Retailers & Their Digital Transformation

Like so many of the hyped trends and cross-industry best practices (e.g. Agile), digital transformation is highly likely to remain unspecific, inconsistent and therefore non-transforming for retailers. Even well-intentioned projects focused on digital transformation (like building a new digital app landscape with as many microservices as possible) does not necessarily lead to more sales, loyal customers and a promising product roadmap. Nevertheless, many retailers understand that a successful digital transformation usually includes an optimal starting point, a permanent orientation point (aka "North Star”) and a goal. However, digital transformation is not a static goal that can be achieved; it is a constantly evolving process.

What Does Digital Transformation Mean to Retailers?

Both society and companies change on the basis of technological progress. Digital transformation takes account of these change processes in both areas. In general, digital transformation is about getting processes, products and services such as BOPIS (buy online, pick up in store) on the right track with the help of new technologies. Ultimately, it should enable retailers to meet the ever-changing needs of customers with the primary goal of generating more revenue. But digital transformation also has the core goal of using technology to make the customer journey easier, more practical and more intuitive for the consumer.

Where to Start With Digital Transformation

There are two things a retailer should have when starting with digital transformation: One, a vision of where digitization will lead, and two, the concrete metrics they will use to measure success. Often, however, there is a lack of perspective at the beginning of the digital transformation that makes it hard to draw valuable conclusions. In the following, I give some suggestions on how the customer perspective can be used to improve customer experience and digital transformation:

Prioritize the Customer (Experience)

Many companies are already aware that customer experience is a leading competitive differentiator and selling point. After all, the 2019 Global Customer Experience Benchmarking Reportfound 87% of companies see customer experience as a central competitive factor, as it has positive effects on customer loyalty, earnings and costs.

The point cannot be overstated: digital transformation in its ideal form means to think from the customer's perspective. It should enable retailers to position themselves in a customer-centric manner and to align products, services and internal processes according to customer needs. The concepts of customer experience and customer-centricity help to determine the appropriate starting point, direction and goal of digital transformation for a particular company. To succeed with the digital transformation from the get-go, however, certain mindsets within companies must change completely.

Inside-Out Perspective: The Organizational Structure

Unfortunately, only a few large companies have the flexibility necessary to adapt to demanding customer needs. Existing legacy systems, complex organizational structures and outdated thinking complicate the process while existing silos make the process cumbersome and slow. Digital transformation, and in particular, the improvement of the customer experience, requires the breaking of silos and the interlocking of work areas and departments within a company to foster agility and innovation.

Restructuring a company's organization offers the opportunity to react more flexibly to rapidly changing customer needs in order to remain competitive in the marketplace.

Outside-In Perspective: Identify improvements for the relationship to the customer

The outside-in perspective is recommended in order to find out where restructuring should ideally begin. The entire organizational structure is considered from the customer's perspective. This approach helps to understand the company’s processes, and ideally to change them. Various frameworks, such as customer journey mapping, can be used to identify gaps between companies and customer’s expectations, redundant processes and the potential for optimization along the entire value chain. This way, it becomes clear which internal company processes need to be mobilized, transformed and which actually need to be digitized.

Solving Real-World Problems

Whatever challenges arise in the value chain of retailers – the customer has no understanding of them. They are not interested in how a company manages its own challenges or what it costs. What counts is that they receive the best cross-industry customer experience. Solving the customer's problems (e.g. availability of goods, complex checkout processes, late deliveries, etc.) before the customer learns about the problem leads to improved customer loyalty and a competitive advantage in the long run, and thus more sales.

The goal of digital transformation should be that all areas of a company interact end-to-end harmoniously to orchestrate a unique customer experience. The biggest obstacle to creating a unique customer experience is validating the assumptions and perceptions that companies have about their customers.

Customer behavior changes just like the state of technology – therefore, digital transformation does not wait for its participants. Those who don’t understand how digital technologies can be used for transforming change processes are inevitably left behind. But technology is not the key driver of change in today's world. The main driver is customer needs, which must be met with the help of technology.