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Why Digital Transformation is More Than Just E-commerce (Thinks Out Loud 331)

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We’ve long claimed around here that "it’s all e-commerce." But, with digital transformation top of mind for so many companies, it’s fair to ask, "Is e-commerce enough?" Can you claim that you’ve become a digital company simply because you’ve introduced e-commerce into your operations? Or is digital transformation more than just e-commerce?

This episode of Thinks Out Loud looks at the difference between e-commerce and digital transformation. We also explore why that difference matters for your customers, your employees, and your business overall. And we look at a few frameworks to help you make the transition from e-commerce-oriented, to true digital transformation.

Want to learn more? Here are the show notes for you.

Thinks Out Loud Episode 331: Why Digital Transformation is More Than Just E-commerce Headlines and Show Notes

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Past Insights from Tim Peter Thinks

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Technical Details for Thinks Out Loud

Recorded using a Heil PR-40 Dynamic Studio Recording Mic and a Focusrite Scarlett 4i4 (3rd Gen) USB Audio Interface into Logic Pro X for the Mac.

Running time: 15m 50s

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Transcript: Why Digital Transformation is More Than Just E-commerce

Well, hello again, everyone. And welcome back to Thinks Out Loud. Your source for all the digital expertise your business needs. My name is Tim Peter. This is episode 331 of the big show. And thank you so much for tuning in. I’ve very, very much appreciate it. I know I say this every, but I wouldn’t do the show if you weren’t here. So I so appreciate you tuning in, giving a listen, joining in the conversation via email and social and the like. Just thanks so much for continuing to support us all these many, many years.

Remember "It’s All E-commerce"?

And the reason I’m talking about all these many years for a second is one of my earliest podcast episodes, episode 13 and episode 14, which were nine years ago. I’d recapped an idea that I’d shared before, probably a couple years before that. About how it’s all e-commerce. How in a digital world, we live in a world where everything is e-commerce. And the point about it is, when all of your customers are using mobile, when they’re using the internet, when they’re using tablets to research, to learn, to understand what it is you offer and what it is you do. It doesn’t matter where they buy, you’re in an e-commerce environment. And we see that today that e-commerce—that digital—influences an enormous, enormous percentage of transactions, regardless of how they transact.

Is "It’s All E-commerce" Still True?

But it’s also worth noting in the context of digital transformation, is that all e-commerce? If you do e-commerce well, is that enough? Have you digitally transformed your business? I mean, you could argue if you’re deriving a significant portion of your revenue and a significant portion of your profitability from digital channels, well then sure, you’re a digital business. You have transformed. And so that’s kind of true. Also…? Not really. When we talk about e-commerce, it’s hugely important and doing it well is an incredibly important component of how you reach your customers and how you improve your business in the future.

A DIgital Transformation Maturity Matrix

I have created this e-commerce and digital transformation maturity matrix. You’ve seen it, it’s available on the website. Just go to any of our podcast episodes and you will find it there for download. And we look at six criteria and those six criteria are

  1. Customer
  2. Strategy
  3. Technology
  4. Operations
  5. Culture
  6. Data and analytics.

And it allows you to rate how you perform in each of those areas, according to four different levels:

  1. Ad hoc, meaning you do stuff about it as it occurs to you, but you don’t have a real process for it.
  2. Aware, meaning, you know that you need a process for it and you are very conscious of where your limitations are. But maybe you still haven’t done a lot to close those gaps.
  3. Striving, meaning that you are making efforts towards actually using digital and incorporating digital into what you do in each of those six areas.
  4. Driving, meaning you’re operating at this level on the daily and looking for ways to improve all along.

Connecting Digital Maturity and "It’s All E-commerce"

Now, when we talk about its all e-commerce, that is very customer focused. And it requires technology and it requires some shifts in your operation and it requires data. And it probably is both strategic for the growth of your business and feeds back into your strategy in terms of how you can get even better at it. But you’ll note it doesn’t talk about culture and it doesn’t mean that you have to be driving in each of those areas.

Digital Transformation is a Journey, Not a Project

The other thing that I want to really talk about with regard to this is the digital transformation itself is not a project. It is not a destination. It is a journey. Because as we saw when digital first started, and as we saw when mobile arrived. Companies that had started doing the digital transformation suddenly had to transform again, as we move forward into areas like voice, areas like the metaverse, which I will talk about in a future episode in more detail. You may need to transform yet again, along each of these attributes, customer, strategy, technology, operations, culture, and data. So digital transformation is never really done. It’s just, "where are you currently in that process?"

Whereas if we think about launching an e-commerce operation, that’s very much a project. Now that doesn’t mean you don’t try to continually improve. It doesn’t mean that you don’t try to continually get better. It doesn’t mean that it doesn’t spawn additional projects to get you better and more customer focused and more capable in your ability to deliver a great online experience, again, regardless of how your customers purchase. It just means that if we say, "Hey, we’re going to set up a Shopify store. Or we’re going to set up our own custom store." If you’re glutton for punishment. Or BigCommerce or something along those lines. You can set up a store, conclude the project, make it part of how you operate your business and kind of be done. Whereas true digital transformation is a continual process.

A Simple Framework for Digital Transformation: One Company’s Approach

Now I saw an interesting framework a couple of days ago. A company I’m working with, they really think of the process of becoming digital across four specific elements of their business. And I thought this was a really useful way to think about it and where the difference really does come in.

  1. The first of these is customer experience. Which obviously you’ll note the real comparison there, where we start with the customer in our digital transformation maturity matrix.
  2. The next is that they talk about digital products or digitalization of a product. Meaning are you actually introducing products that are themselves digital or using the data that you collect from your products? And let’s take a step back, collecting data from the use of your products that itself can either enhance the service, can enhance the product or can be a product unto itself. There’s an episode we did … oh, a couple years ago, where we asked does digital make all companies service companies? And the answer is, kind of, yeah. And this is what digital products or digitalization of your products really talks about.
  3. The next element that was important to this specific business was supply chain and manufacturing. Have they used digital to improve that? Not just computers, but are they actually using the data produced? Are they actually feeding that data back into the system and letting itself improve over time?
  4. And then the last element that they look at is sort of … I’m going to call it the miscellaneous one, but it’s all of your back office things. HR, finance, your executive suite. Are you using digital to enhance the capabilities fully? And again, not just did give them a computer? But is digital really driving the decision making process? Is it streamlining your ability to create offerings to your employees? Is it streamlining your ability to handle things like payroll or acquisitions or any of the other finance applications that you care about?

Rating Your Business’s Digital Transformation

And they think that only when they can say yes in all four of these areas, will they be a natively digital company. Now, I thought it was a brilliant way of thinking about it for their business. Some businesses, you may not have supply chain or manufacturing. You may have your business processes, you may have your service processes. So it’s not a perfect framework for everybody, but it’s an awfully good framework for them. And I think if you look at your customer experience, you look at your product or services and say, "How do we digitize them? How do we digitalize them?" When we look at your process management and we look at all of your back office stuff. Well, I think our framework of customer, strategy, technology, operations, culture, data analytics incorporates that. But I also think it’s a good way to say, "Where are we on the curve? How are we doing there?"

What Separates Digital Transformation and "It’s All E-commerce"?

So it’s something where it’s all e-commerce is correct because you can apply that same mindset of, what would this look like as an e-commerce experience for each of those areas? And that one, I would say, yeah, it’s kind of true. What’s also true is, it’s not entirely accurate because it’s not part of your culture if it’s not part of where you are as an organization, part of how you think all day, every day. Then you may still have some room to go, you may still be in the aware or striving phase. And you have the opportunity to continue to improve.

What Digital Looks Like in Practice

Now to move this out of the realm of theory and into the room of practice. Why does this matter? Well, it matters because it’s how you’re going to compete in the current world with not just the businesses across the street, but also the large players, the Amazons, the Googles, the Facebook, the Apples, the Microsofts, the Spotifys, the Netflixes. This is what they do natively. And it doesn’t mean that you have to go out and build all this yourself. It doesn’t mean you have to buy some technology and run it yourself. You may say, "We’re going to outsource our e-commerce platform. We’re going to outsource our finance platform to people who do that natively."

Conclusion: Why Digital Transformation is More Than Just E-commerce

But we’re going to recognize what is core to our business and how do we improve that using digital, such that we’re able to meet the needs of our customers, meet the needs of our employees and meet the needs of our stakeholders in the community and among our shareholders. Because that’s how you move from just doing digital as a project and actually making it core to what you do, making it something that you do natively. And at that point, I don’t know if it’s all e-commerce, but it’s certainly all digital. And that’s where you want to end up.

Show Closing and Credits

Now looking at the clock on the wall, we are out of time for this week. I want to remind you that you can find the show notes for today’s episode, as well as an archive of all past episodes by going to TimPeter.com/podcast. Again, that’s TimPeter.com/podcast. Just look for episode 331.

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Sponsor Message: SoloSegment

I’d like to think a moment to thank our sponsor. Thinks Out Loud is brought to you by SoloSegment. SoloSegment offers an amazing suite of search tools that provides search as a service for large enterprise companies. They focus on business results, not search results. With easy automated tools that help customers find the content that matters to them and helps drive business goals for you. They do this all while protecting customer privacy and improving your results. You can learn more about SoloSegment and all the amazing work they do by going to SoloSegment.com. Again, that’s SoloSegment.com.

Show Outro

With that said, I want to say once again, how much I appreciate you tuning into the show every single week. It means the world to me. I know you have lots of choices of how to spend your time, the fact that you choose to spend any of it with me just means the world to me. So thank you very, very much. And with that, I hope you have a wonderful rest of the week. I hope you have a great weekend and I will look forward to speaking with you here on Thinks Out Loud next time. Until then, please be well, be safe and as ever, take care, everybody.

Tim Peter is the founder and president of Tim Peter & Associates. You can learn more about our company's strategy and digital marketing consulting services here or about Tim here.

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