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Why organisations fail their customers...

... and what may be done about it.

· Business,digital,transformation

Much has been written about the issues customers of large organisations face.

Having experienced those organisations "from the inside" for more than a decade, I find the following framework useful in order to explain and address these issues.

(Almost) all large incumbents are organised along a hierarchy (originally borrowed from the military). This hierarchy tends to be functionalised, meaning that accountabilities are organised along well-established, traditional skill sets such as "operations", "marketing", "product management", "finance" and the-like.

This functionalisation in turn creates so-called "silos": each silo has its own budget, targets, KPIs and so forth, in effect creating boundaries versus the other silos.

From a customer's perspective, these silos create friction in whatever journey the customer needs to complete to achieve a useful unit of activity, for example "becoming a new customer" or "adding a new product".

The symptoms of this situation are well known: most organisational business units feel they are working hard, achieve most of their goals and report mostly "green" scorecards.

Customers, however feel unloved and taken for granted, needing to work "against" the organisation which is meant to serve them.

So, what to do about it?

Un-addressed, this situation exposes the incumbent organisation to competitors, especially competition from substitutes developed outside traditional industry boundaries.

The transition to a digital economy provides ample examples: Facebook and Google versus newspapers, or in fact Facebook and Google versus many industries.

It would be easy to conclude that incumbents needed to "start afresh", shedding their old self and enjoy the benefits of a shiny green field.

Unfortunately, reality isn't this simple: more often than not, most value is still being generated by the traditional business model. In fact, new digital business models are unlikely to ever produce the same economics for the incumbent in their traditional market. So the core challenge incumbents face is how to preserve and keep optimising the old model, whilst also develop the new model - at the same time.

A key success factor of a successful transition is to identify, access and monetise the old model's assets in the new model without impeding either.

Many incumbents have plenty of assets which could be leveraged in this way, effectively re-imagined in a digital business model.

Think about an organisation that visits every hosuehold and business every business day; or an organisation that has access to over 50% of the population's digital data stream in real-time. Data is probably the most pervasive asset that incumbents could monetise in a new business model, but there are plenty of others.

This isn't easy: uncertainty about regulatory frameworks (originally conceived in the traditional industry definition) and doubt about community expectations create formidable hurdles for management to safely make the transition.

This leads to the all-important topic of the motivation of management in leading the transition of incumbent organisations - the subject of another post in the future.

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