Why digital optimization is the new digital transformation

Digital transformation efforts have become a critical investment for companies looking to compete in the digital-first, customer-centric era. For companies just starting to invest in these changes, the pandemic has rapidly accelerated the need for digital products, but the move to digital is a long-term, resource-intensive investment. IDC predicts that companies around the world will spend $6.8 trillion on digital transformation initiatives by 2023.

The key to a successful digital strategy is understanding what keeps your customers coming back, then optimizing and personalizing digital experiences based on those insights. Some other key considerations that any business should keep at the forefront of digital transformation projects are the following.

Digital transformation is more than just digitization

The common misconception that digital transformation and digitization one and the same is often the first and most common failure point for organizations. Simply bringing a non-digital product online is not a digital transformation. Organizations need to build a digital focus into the core of the business. For example, a hotel that moves their reservation process over the phone to their website digitizes their user experience, while organizations like Airbnb and HipCamp revolutionized the vacation experience.

While digitization remains an essential part of the digital journey, this is not the turning point that will help you attract and retain customers. Digital transformation requires organizations to rethink how to deliver value to their customers in a digital world and transform their business model, processes and products to reap the full benefits of their digital technologies.

Customers will tell you how to keep them – if you will listen

Digitization unlocks the ability of companies to continuously engage with customers over time, shifting investment from one-time purchases to a greater focus on retention and lifetime customer value. Despite this, many companies still focus most of their efforts on acquiring new customers, which is important for short-term growth, but long-term sustainable growth requires lifelong customers and brand advocates. When you better understand how your customers interact with your digital products and experiences, you can dramatically improve offerings to increase retention and, ultimately, revenue.

When developing and launching new products, pay attention to what your customers do when they use them. Which parts of your product are they most involved with? Do you notice any overlap between customers using certain features and customers using the product a second time? Where do customers get stuck or leave the experience?

By observing customer behavior and answering these types of questions, you can optimize your digital product experiences.

The value of data lies in access and use

Digital transformation must be rooted in cross-functional alignment, especially when it comes to managing and distributing data. Traditionally, data science teams are responsible for collecting, analyzing, and reporting product data. However, they are not the only professionals in your company who benefit from access to data. Such a traditional ownership structure can lead to bottlenecks and reduced productivity for the entire organization. Data brings much more value to the business if all teams not only have access to it, but use it to experiment with new ideas and innovate with new solutions that customers really want.

Most companies grow up in a planning-oriented environment where a lengthy process of market testing, proof of concept and launch preparation culminates in a go-to-market timeline of 18 months or longer.

In a digital world, the market moves much faster and products conceived 18 months ago may not be valuable today. To truly transform digitally, organizations must be willing to take risks and place bets on rapidly engaging users with new digital experiences. Moving away from project scheduling and fixed end dates gives your organization more flexibility to explore what works for your users and what doesn’t. From there, adjustments can be made, rather than spending more than a year on a product launch that could fail.

One of the most prominent burger chains in the world, for example, has learned first-hand from such trial and error. The team behind the company wanted to capitalize on the increasing popularity of coffee subscriptions and online ordering services. Within just a few months, the company both launched a coffee subscription service in their digital application and then discontinued it.

Using a product analysis tool, they found that customers ended up not using the coffee business to the extent they originally expected, causing the company to quickly shut it down. Despite this decision, the team gained invaluable insights into the customer base and avoided wasting time with a 12-month launch plan that would ultimately have failed. The ability to take risks and experiment with new products enabled this organization to innovate new offerings that better match their customers’ preferences.

To make it through the post-pandemic era, every company must undergo: digital transformation — but the digital journey doesn’t start and end there. To make digital investments worth the time and effort, companies must first understand what it means to transform digitally. Then, they must digitally optimize by cultivating a culture that focuses on understanding customers to build products that drive long-term customer loyalty and sustainable growth.

Justin Bauer is the chief product officer at Amplitude.