Gamification
Data Science

The Ramp Up — The Behavior Economics of Successful Digital Transformation: Part 2

Welcome back to the 6th entry of this digital transformation (DT) mini-series. Over the course of this mini-series, we’ve learned a powerful framework (i.e. Geoffrey Moore’s 4-gears model) that help businesses survive and thrive in today’s digital economy. There is no doubt that the 4-gears model is related to DT, since both are trying to help companies survive the digital disruption, but their relationship isn’t obvious. I will fix this today before diving deeper into the behavior economics of successful DT.

 

Since this post builds on the previous discussions of this mini-series, if you missed any of the earlier entries, it’s a good idea to review them before moving on:

  1. Successful Digital Transformation Must Go Beyond Digital to the People, Process, and Culture
  2. Why Transform Your Business Digitally? — A History Lesson through the 4 Gears
  3. The Offensive Logic to Digital Transformation — Customer Experience
  4. Gear Up for theNext Level of Digital Engagement
  5. The Right Start — The Behavior Economics of Successful Digital Transformation: Part 1

 

Digital Transformation vs. the 4-Gears Model 

DT vs 4 Gears 700px.pngThe 4-gears model is a sustainable business model in the digital age. It identifies what businesses must do differently to stay competitive in the digital marketplace (i.e. they must learn to engage and enlist in addition to acquire and monetize). But it doesn’t show us how to get there or even where to begin. In fact, since the 4-gears model is a loop, you can begin anywhere, as long as you can get all 4 gears to spin in sync eventually.

 

On the other hand, DT can be view as the programmatic execution of the required changes for companies to learn to spin the 2 new gears, and eventually get all 4 gears in sync. Think of the 4-gears model as a snapshot of the final operating state of a thriving enterprise in the digital age. Then DT is a roadmap that shows us how to get to that final state. It guides the implementation of all the necessary technologies, processes, and programs to transforms the company from its current state (2-gears) to the final state (4-gears).

 

As such, DT is often a multi-year journey. It invariably starts with the adoption of some digital technologies to transforms one part of your business operation. But it must eventually change the people, process, and the culture throughout your entire company in order to last. This is very difficult, because many things could change over the course of such a long journey—stakeholders may leave, funding may be cut, and the technology could change dramatically. When such disruptions occur along the DT journey, corporate inertia will often revert the company back to business as usual (2-gears), which will eventually kill the business.

 

How can we mitigate the detrimental impacts of these external factors that we don’t control?

 

Overcoming Corporate Inertia with Baby Steps

The solution is to approach this massive transformation in a more agile fashion, with smaller increments and more iterations toward the final outcome. This is also known as the principle of baby steps in behavior economics and gamification, which can effectively drive the organizational learning and behavior changes introduced by DT. This principle has 2 phases:

  1. Pick the right starting point: You must start any change with something that people are familiar with and are already doing (i.e. acquisition or monetization). This will achieve the lowest barrier of entry, and therefore maximize the initial adoption rate.
  2. Build a ramp to the final goal: You must break up any big change into smaller intermediary steps to create a ramp. This will make it easier for people to advance towards the final behavior outcome (i.e. getting all 4 gears to spin in sync), and lower the abandon rate during the process.

 

building ramp step up 700px.pngBy applying baby steps to DT, we are essentially driving the largest possible population as far along the transformation process as possible. We’ve already discussed phase 1 in the previous post of this mini-series. Although we can, in theory, begin the DT journey with the monetization gear (e.g. with mobile payment, IoT, etc.), it’s much easier to start with the acquisition gear (see the previous post for explanation).

 

Today, we will address phase 2. Because the precise ramp is dependent on your vision, we will use the example of a social-driven DT to illustrate the ramp from acquisition to enlistment.

 

Building the Ramp from Acquisition to Enlistment 

Start with social acquisition (marketing): Publish hyper-relevant content on social channels (i.e. the right content, on the right channel, at the right time). Since this is where we will begin our DT journey, it will need to have the 3 success ingredients from the start:

  1. Customer centricity: It must improve the customer experience (CX) for your customers.
  2. A clear vision of what DT means to your business: It must improve your marketing performance as measured by standard marketing KPIs.
  3. The right technology: It must improve their productivity of your marketing team and simplify their work through integration.

Since this is something that brands already do and understand, there is no need to create any urgency or compelling event to sell it. The improved marketing performance and employee productivity should suffice to drive the initial adoption.

 

Due to the hyper-relevant nature of these content, consumers will naturally engage them more frequently. This immediately puts the ball back in the brand’s court. The need to respond to customer reactions, comments, or inquiries will compel brands to start engaging with their customers. The better your social marketing perform, the more conversation there will be for you to respond, which creates a greater need to engage. So this is a natural ramp to spin the next gear—engagement.

 

Once brands start to engage on social media, they will quickly discover the immense scale of social. They will realize that no matter how much they try, they just can’t respond to all the conversations on the social web. The desire to scale their engagement will naturally compel brands to enlist customers for help. Again, the more you engage and the deeper you engage, the more you will need to scale, which creates a greater need to enlist. This is another natural ramp to spin the next gear—enlistment.

 

stairs acquire engage enlist 700px.pngEvidently, going from acquisition to engagement, and then to enlistment is a course of natural progression. The success of each step along the way creates the urgency and need for the next. During this progression, brands will gain sophistication with social interactions and be more comfortable with the lack of control. They will also recognize the long-term value of engaging and enlisting customers and be more comfortable with the delayed ROI. Meanwhile, this also gives brands the time to learn the best practice to manage their social customers and implement the internal processes to help them realize the full potential of enlistment. For example, tribal knowledge creation, crowdsourced ideation and prioritization on product improvements, and co-creation of new product and services.

 

By building this ramp from acquisition to enlistment, many of the common objections for diving in with engagement and enlistment can be resolved along the way as you mature. Of course, the right technology must also be in place to facilitate the spinning of the 2 new gears (i.e. engage and enlist).

 

Conclusion

Today, we accomplished 2 things. First, we clarified the relationship between the 4-gears model and DT. The 4-gears model provides an image of what a thriving and sustainable digital business will look like operationally. In contrast, DT provides the roadmap that helps organizations get there by implementing the necessary changes in technologies, processes, programs, etc.

 

Second, we’ve demonstrated the power of baby steps in overcoming corporate inertia. So if we use baby steps to (1) choose the right starting point and (2) build a ramp to the final outcome, we can use it to drive the organizational changes introduced by DT effectively. Specifically, we can leverage baby steps to drive the shift from the traditional 2-gears model to the future-proof 4-gears model.

 

What does this mean to you?

 

If you are hitting walls trying to get your business to engage and enlist, it’s not your fault. Your organization and leadership are just conservative. The solution from behavior economics is to not start with engagement or enlistment, even though that’s where you want your company to go. Instead, start with acquisition—marketing (which your business is already doing) and demonstrate the superior result of your digitally transformed social marketing. Then just look ahead and plan along, because the rest of the DT journey will gently reveal itself due to the ramp we created from the baby steps principle.

 

*Image Credit: Comfreak, 3dman_eu, and PublicCo.

 


 

Michael Wu, Ph.D.mwu_whiteKangolHat_blog.jpg is CRM2010MKTAWRD_influentials.pngLithium's Chief Scientist. His research includes: deriving insights from big data, understanding the behavioral economics of gamification, engaging + finding true social media influencers, developing predictive + actionable social analytics algorithms, social CRM, and using cyber anthropology + social network analysis to unravel the collective dynamics of communities + social networks.

 

Michael was voted a 2010 Influential Leader by CRM Magazine for his work on predictive social analytics + its application to Social CRM. He's a blogger on Lithosphere, and you can follow him @mich8elwu or Google+.

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