The evidence is piling up that organization-wide digital transformation is challenging for many organizations. Companies are beginning to report high failure rates for digital transformation, similar to failure rates for large-scale transformation in general. There are too many legacy systems, too much technical debt, and too many functional and business unit data silos to overcome.

In the early days of discussions about digital transformation, it was common to paint a broad picture of what digital transformation might accomplish. For example, one 2011 study argued that digital transformation should transform operational processes, business models, and customer experience. These are all are worthy objectives, and it’s conceivable that for many companies, each of these could be so broken that the business couldn’t survive without a full makeover of any or all of them.

However, few organizations have the necessary resources — financial, human, and technical — to be able to transform so much at the same time. Therefore, they need to prioritize their investments.

So where to start? If the three major options are operations, business models, and customer experience, why should companies address internal processes if they are at least adequate? And while changing business models can lead to substantial improvements in company valuations, it’s a heavy lift to entirely change a business model with which customers, employees, and business partners are familiar. That leaves the customer experience.

Customer Transformation With Digital

We’d argue that a much better alternative to tackling an expansive organizational transformation with digital is to focus on the transformation of customer experience, relationships, and processes. This is not because transforming the customer experience is easiest, but because doing so is far more likely to keep a company viable than changing other aspects of business. If an organization has happy customers, it can probably survive any inefficiencies in accounts payable or employee benefits tracking.

Many digital transformations thus far have not focused on customer-oriented applications, at least not in a way that customers would notice. One study across four industries, for example, found that $4.7 trillion of spending on digital transformation yielded only 19% of customers reporting significant improvement in the experiences they encountered with companies. Another study of digital transformation in global banking found that the most aggressive digital banks focused primarily on cost-cutting. This did improve profitability, but it’s unlikely to make customers more loyal or satisfied.

Many established businesses are concerned about the entry of tech startups into their industries. While new companies may have streamlined internal processes, what usually makes them attractive to customers is their customer experience. If established companies are pursuing digital transformation in order to repel new tech-intensive entrants, their digital innovations need to be focused on applications that are visible and beneficial to customers. This means not only internal customer-oriented processes but also the creation of new digital product and service offerings for customers.

Internal customer-focused transformation begins by focusing on viewing the business from the outside-in — that is, from the customer’s point of view. The ability to do this has changed hugely in the past two decades, largely due to the evolving body of knowledge around customer journey mapping and the critical importance of focusing on end-to-end business processes for customer value creation. Digital transformation success will revolve around customer value creation and understanding the importance of improving processes before automating them.

Customer-Centric Digital Transformation in Financial Services

As we’ve noted, in the financial services sector, the driving force is often cost reduction — reducing back-office transaction costs and moving customers to cost-effective digital channels from more expensive branch-based interaction channels. That’s not exactly outside-in thinking. There is no doubt that reducing costs is important to most organizations. However, paying lip service to customers and focusing exclusively on expenditure reduction is fraught with danger. In financial services and most other industries, emphasizing customer experience is likely to deliver superior results on revenues, profits, and stock price.

For example, the global bank BBVA has made a strong push on digital capabilities that are primarily focused on customers. More than half of the bank’s almost 40 million customers interact digitally with it, and just under half use mobile channels. BBVA can enroll customers without a visit to a branch using biometric verification, and its Bconomy app provides monitoring of planned expenses, income, and savings, makes peer comparisons, and provides recommendations for customers’ financial health. The bank’s “AI Factory” is focused heavily on personalizing customer financial advice and creating the “self-driving bank account.” A global Customer Solutions organization oversees these customer offerings.

The payoff for BBVA has been impressive: Even with the costs associated with these investments, BBVA leads its European peer banks in profitability.

Teams and Tools for Customer-Centric Transformation

The fact that departmental silos are bad for business is now fairly broadly recognized, and when it comes to undertaking the tasks required to transform the customer experience, the independent silhouettes of silos stand out in high relief. Silos block the type of collaboration needed to create value for customers. Data silos and technology silos also stand in the way of digital business success.

Data governance processes can help to prevent the creation of data silos, and data scientists can play a significant role in integrating data across them when they do exist. There are also new AI tools that can help to integrate data across departments. The initial focus of them should be on customer data.

The use of cross-functional teams for understanding and implementing customer-centric collaboration can fuel digital transformation success, too. This means taking an end-to-end process view to understand the customer experience from order to delivery and looking at the workflow as each department is touched by the process. Even large, complex organizations are using so-called “process mining” tools that easily capture information from enterprise transaction systems to provide detailed, data-driven information about how key processes are performing.

Liberty Mutual, the U.S.-based insurance company, has emphasized a focus on both customer and business outcomes in recent years and employs a cross-functional team to transform customer processes. “In our global retail markets unit,” Liberty CIO James McGlennon told Forbes, “we have a team that is focused on quoting, binding, billing, payments, claims processing, and all that entails with an eye toward the customer journey every step of the way.”

Liberty’s multifaceted digital program includes the use of a voice-controlled chat bot that is paired with Amazon’s Alexa to allow customers to navigate the insurance process simply by speaking. It’s also noteworthy that Liberty Mutual was the recipient of the Digital Workplace of the Year Award in 2018 for its strategic approach to simplifying employees’ lives. The understanding that “happy employees make for happier customers” has contributed to this company’s success with digital transformation.

The road to successful digital transformation requires focus and a mindset that views change as an opportunity to engage customers in new ways. Lack of focus leads to “random acts of digital” that don’t provide performance improvements or benefits to customers.

Senior leaders must ensure that the resources and efforts devoted to digital transformation benefit those who buy the company’s products and services and that those efforts are noticed by customers. Otherwise, digital transformation is unlikely to alter a company’s performance and success in the marketplace.