"Transformation is Pragmatic:" What to expect in 2019
From artificial intelligence (AI) to customer experience (CX), to IoT, CMO and CSO strategies, Zero Trust and VC funding, Forrester says there will be seismic shifts in 2019 in its “Transformation is Pragmatic” report.
The strategy shift toward pragmatism is partially a result of tech leaders’ mixed 2018 report cards. Forrester predicted that 2018 would be a year of reckoning. According to the report, leaders intellectually understood the scope and magnitude of the external pressures: challenges like changing, escalating customer demands, and opportunities to embrace new technologies either to drive efficiencies, penetrate new markets, or create new revenue streams.
The problem was that realizing tasks like CX and digital transformation was expensive and more easily strategized about than actually accomplished. It made leaders ask questions about how they ran their businesses. The report says that some progressive CIOs and CMOs drove change, but most struggled to get their organizations on board.
Why? Many organizations were not ready. Some underestimated the real work required to overcome technical debt and poor data governance, some failed to invest in back-office technologies that would effect efficiencies, some lacked executive consensus, and some failed out of fear that it would disrupt revenue performance. The result? 2018 CX performance was flat. More than 50% of digital transformation efforts stalled.
Cut to 2019
The good news is that many of the foundational challenges remain the same. The “devil you know” algorithm. Organizational readiness, technical debt, data governance, and aging brands top the list. The even better news is that leaders have the chance to create a more durable and potent foundation having waded through last year’s exercises, taking that experience and pragmatically addressing the hurdles.
However, Forrester warns there’s continuing risk that this trend could affirm the status quo and reinforce organizational inertia which could hold some firms back. It raises the specter of adding internal headwinds to the existing headwinds of an unforgiving market. It cautions that the prospect of driving change and finding growth will not be promising if the economic predictions of a slowdown or downturn come to pass.
CX and digital transformation
89% of CX professionals surveyed state that the ROI of CX is not well established in their companies. To boot, Forrester’s Customer Experience Index (CX Index) shows that few businesses made real gains in 2018. Most are on a plateau, and a few fell back. Forrester believes that as a result 20% of brands will give up on strategic CX initiatives and resort to price reduction for short-term gains. It points to what it calls a strategic and structural mismatch between what CX needs to do and what CX is allowed to do, or is capable of.
2019 will see that mismatch continue to play out. A few firms will actually succeed, but most will continue to try to achieve more gains in find-fix or non-disruptive enhancements. Some organizations will regress to the tried and true methods like price discounting. Forrester predicts some will panic.
Digital transformation will move to what Forrester describes as, “A surgical portfolio view of digital investments with the goal of making incremental and necessary changes to operations,” in 2019. The focus will be on tangible efforts, for instance shifting customers to lower-cost digital channels, launching digital products, monetizing data assets, and automating processes to improve margins. The report predicts 15% of firms will successfully cross the digital bridge by embracing a fundamentally customer-driven, agile delivery model leveraging modern development and architecture.
It’s all about the brand
Over 50% of CMOs will address brand as their top priority and move budget and focus toward revitalizing it. Why? According to Forrester, up to now, their brand was good enough, not a top priority, so few paid attention to it. But brand is back in part because of how brand promise informs and affirms the customer experience.
The report weighs pluses and minuses saying that CMOs returning to basics and building their foundation from which to deliver on the firm’s CX vision makes sense. But it cautions this could be a double-edged sword. Some CMOs could be perceived as retreating to their comfort zone and avoiding the hard task of driving strategic and operational change.
AI and IoT
Robotic Process Automation (RPA) and AI will join forces to create digital workers for more than 40% of enterprises. AI is definitely transformative, but the report suggests that its adoption was thwarted by insufficient information architecture, being too horizontal and too confusing. Those barriers aren’t going to disappear, but due to GDPR and security concerns, companies have to sort themselves out of data debt and will turn to AI and other intelligent tools to solve governance problems.
While B2C IoT is still flailing, B2B is set to take off in 2019. Forrester believes it will focus on driving efficiencies, connecting the enterprise, expanding the edge, and provide personalized customer experiences. There are common scenarios that apply across industries with industry-specific use cases propelling adoption in industrial manufacturing, healthcare, retail, and utility markets.
Venture capital (VC) funding across mar-tech and ad-tech has been declining since 2016 and investors are looking for the next big thing. Horizontal plays like AI, edge computing, quantum, and distributed ledger technologies continue to be shiny objects for investors. More investment will go vertical, where technologies like AI are tied to specific use cases and need. In other words, startups are more affordable in an industry ecosystem, or an incumbent’s M&A strategy, driving up valuation and conversion. Look for opportunity in manufacturing, retail, financial services, and transportation.
2019 tea leaves
Forrester believes the stakes remain high, and the fate of many companies hang in the balance. It suggests that a year of pragmatism is good for traction provided it yields purpose-driven, decisive, and more far-reaching strategies in 2020. For most companies, traction will build organizational confidence. For some, pragmatism will be the catalyst for strategy abandonment.