Customer loyalty is up for grabs; retention is now mission-critical

Repeat any word or phrase enough, and it can lose all meaning. For many years, the term “digital transformation” has felt increasingly hollow; mere window dressing for any business initiative involving digitizing existing operations. Then the pandemic hit. Suddenly, we had an obvious definition focused on areas of urgent need, such as remote working and learning, digital commerce, robotic process automation, chatbots, and cybersecurity. For organizations that acted with urgency, digital transformation has a newfound meaning and purpose moving forward. 

The overnight shift to digital-first work and living forced years of digital acceleration in a matter of months, signaling the death of the multi-year transformation. Finally, after many difficulties and even failed attempts over the past decade, organizations overcame politics, bureaucracy, and fear, to march on a clear path forward to compete in a new world. The whole organization came together and oriented around one clear goal: supporting customers, and employees, as everything changed and continued to evolve in new directions. There was no choice if they wanted to fight for survival against digital Darwinism. “Adapt or die” was now the rallying cry of business and IT leaders!

The pandemic did more than disrupt how businesses work. If you flip the lens, customers also had to completely shift how they shop, for almost everything. Digital was now at the forefront of the entire customer journey, including discovery, validation, purchasing, and service and support. 

Yesterday’s standards no longer applied. With digital came new behaviors, more options, and exposure to better, more intuitive digital experiences. Customers found themselves experimenting with options because their needs rapidly adapted to the intensified digital-first world. And their experiences were now the new standard of interaction, regardless of industry. McKinsey research found that 75% of customers are prioritizing digital channels during the pandemic and will likely continue to use them as the world reopens. More urgently, McKinsey also discovered that 75% of US consumers have already tried different stores, websites, or brands during the COVID-19 crisis. And, 60% of these consumers expect to integrate the new brands and stores in their post-COVID-19 lives. In other words, digital Darwinism is a clear and present danger or opportunity for growth. Your customers’ loyalty, and that of your competitors, is up for grabs. 

Organize for a new world order and start with your customer

Even before the pandemic, the status quo wasn’t working. It is estimated that by 2027, 50% of the S&P 500 companies will be replaced. In the Novel Economy — where market conditions still remain unclear and undefined — it’s imperative that line of business owners and IT continue to collaborate in a hyper-focused way. The ability to improve business agility and time-to-value hinges on this cross-functional alignment. 

There may be no playbook, but there are some pages to develop for moving forward. We can build on the heroic accomplishments of 2020-2021. Your successes and failures from the past year can help guide your next steps as long as your business, and IT leadership stick together. The signs are good, with two-thirds of CIOs believing their relationship with CEOs has strengthened in the past year. 

A great place to start is where your most pressing problems are from a customer perspective. If you don’t know how your product portfolio supports and retains customers, you need to baseline its performance and fast. Introduce measurement mechanisms that focus on your software-driven product value streams. 

You need to define how software delivery work creates and protects value through the eyes of your customers through features (business value), defects (quality), risk (security vulnerabilities), and debt (impediments to future delivery). Crucially, ascertain how you can accelerate the flow of this work from end-to-end to meet clear customer-centric outcomes better and sooner.

Measuring from the customer POV

Known as data-driven value stream management (VSM), measuring and improving this end-to-end flow provides leadership with the rapid feedback loops required to innovate faster. The speed of your feedback loops is the dividing line: it’s what Amazon and other digital-native juggernauts are harnessing to learn, iterate, pivot and deliver at such devastating speeds. 

Using VSM management paradigms like the Flow Framework®, IT organizations can make intangible software work visible and measurable from a business context. Using agreed outcome-based metrics that focus on business results, IT can collaborate better with business leadership to remove the bottlenecks slowing their software delivery teams down. These insights into flow can help leaders learn and adapt faster to shorten time-to-market, boost throughput, improve product quality, and meet other identified business outcomes sooner. These metrics can also help us find and track our leading indicators. 

You can’t wait for traditional business metrics to measure your market performance or progress. You need new ways to measure how digital assets are delivering customer value. You should align your measurements to leading indicators (customer effort, retention rates, product usage, NPS scores) that clearly show whether you’re on track with your continuous improvement journey to optimize the customer experience. They can also help you invest in your operational and business models as you go. 

Listen to your IT leaders

IT leaders and their teams are perfectly positioned to help you identify those leading indicators. Bruised and battered, but proud of keeping the boat afloat during the pandemic, they’ve more than earned the right to have their voice heard.

If you’re a business leader, listen to them. If you’re an IT leader, now is your time to share your vision. IT and business leaders can draw on the lessons from this past year to move away from the perception that digital transformation is “just about digital”.” Both groups can recognize that it is about business model modernization and innovation. Businesses need to address new market needs, as well as current unmet needs. 

Don’t just look within or at competitors. Look at trailblazers regardless of industry. For example, we can learn a lot about operational and business model innovation from startups. They recognize that using IT to transform is about extraordinary radical growth.

The adage of fail fast, fail often still rings true. Conditions are just too uncertain right now to rely on meticulously crafted annual plans based on certainty. You have to keep moving and experimenting. Once you’ve found what is working, what products are delivering customer value right now, you can double down on improving the efficiency and speed of those product value streams through your lightning-fast feedback loops.

Reverse engineering the customer experience

While overall sales have been down since the pandemic because of reduced footfall to stores, digital sales increased exponentially to lay the foundations for long-term sustainability. Nike, for instance, saw an 82% increase across digital channels, a trend that the sports company’s CEO, John Donahoe, thinks demonstrated that the company was maintaining a “strong connection to consumers.” 

“Strong connection” is a powerful phrase to drive our thinking. How do we continue to connect with people in a meaningful way? The psychological impact of the pandemic on how we live, work and plan our lives cannot be understated. On average, it takes 66 days for new behaviors to become second nature. How people have adjusted to their new existence within the remote environment is a leading indicator of who they are today and how that shapes their future selves. We must examine our product portfolio through that lens.

Start with the simple question, “Who are the people, the humans, behind the screen?” and reverse engineer the customer journey from there. This process helps us think about all the key touchpoints — from sales and marketing to product development and customer support — that create a good (or worse, bad) memorable experience. The correct measurement to provide rapid feedback at each stage of this process is critical to spot the bumps in the digital road that create an unpleasant memory, turning the customer off the brand (most likely for good). 

Measuring the whole customer experience from the “what” to the “how”

Whether it’s an app or an e-commerce site (the “what” that produces value) or the actual development platform that creates those customer touchpoints (the “how” to create and protect business value), you need a way to capture feedback from internal and external customers.

As Adrian Cockroft, formerly of Amazon Web Services, underlines, the most critical metric is how long it takes for an innovative idea to reach a customer (defined as Flow Time in the Flow Framework). You can reduce your Flow Time by applying the theory of constraints to the feedback loops of your most important product value streams. Do you know what’s holding you back from support customers today? Do you know where the bottlenecks in your feedback loops are? 

If not, now is the time to apply the real-time measurements that provide those answers. These customer performance indicators can help you better understand who your customers really are today, what they really need, and how you can best connect with them on an evolving basis. 

It’s not always a shiny new app or feature that can save the day. Perhaps it’s about reducing technical debt so that your company can accommodate new features. Or maybe it’s something else entirely that you’re unaware of, a customer pain point that means they’re experimenting elsewhere. The critical thing is to have the means to find and address those issues, to capitalize on those opportunities. 

Digital Darwinism is now a constant. To survive and thrive, digital transformation is now infinite, and adaptive response is king. Change is going to happen — either to you or because of you. Now is the time to create, reinforce or build upon the cross-functional collaboration that is commonplace in the world’s most successful organizations so that you can focus on agility, speed, time-to-value, and most importantly, ensuring the loyalty of your customers.

You can hear more on this topic in a deeper conversation between Dr. Mik Kersten and me on his podcast, “Project to Product.”

This article is co-authored with Dr. Mik Kersten, CEO and founder, Tasktop and the bestselling author of Project To Product: How to Survive and Thrive in the Age of Digital Disruption with the Flow Framework. Dr. Kersten started his career as a Research Scientist at Xerox PARC where he built the first aspect-oriented development environment. He then pioneered the integration of development environments with Agile and DevOps tools while working on his Computer Science PhD at the University of British Columbia. Founding Tasktop out of that research, Dr. Kersten has written over one million lines of open-source code that are still in use today and has brought seven successful open-source and commercial products to market.