Khoros Atlas Logo


The Right Start — The Behavior Economics of Successful Digital Transformation: Part 1

Lithium Alumni (Retired) Lithium Alumni (Retired)
Lithium Alumni (Retired)

Let’s continue the discussion of digital transformation (DT), but we will take a different perspective today. As some of you might know, I’ve always had a keen interest in human behavior. I’ve published many articles on gamification, behavior economics, and its application in the business world. Since DT is typically a multi-year project with many stakeholders and complex human factors, perhaps we can apply a little behavior economics (or even gamification) to this transformation process.


However, DT is also a journey that starts with the adoption of some technology to transform some part of your business, where should you start? We’ve already learned that a customer-centric DT strategy is crucial to paving the road to success, but there are still many parts of a business that could interact with customers. How should you phase this multi-year project? Where should it end up? These are the questions we will explore over the next few posts. Today we will focus on choosing the right starting point.


If you missed the previous blog posts on this topic, I recommend reviewing some of the background materials before moving forward. The related blog posts can be accessed here:

  1. Successful Digital Transformation Must Go Beyond Digital to the People, Process, and Culture
  2. Why Transform Your Business Digitally? — A History Lesson through the 4 Gears
  3. The Offensive Logic to Digital Transformation — Customer Experience
  4. Gear Up for the Next Level of Digital Engagement


Engagement is Hard, Enlistment is Even Harder

engage vs enlist 640px.pngFrom the 4-gears model, we know that business must learn to spin the engagement and enlistment gears in order to survive the digital disruption. So it’s natural for practitioners to start spinning these 2 gears right from the beginning. There is nothing wrong with this. Many digital visionaries have already gone down this path, and they are enjoying the fame and glory from their success. But it really takes a visionary who have a strong conviction (which is rare) to pull this through. However, most business people are pragmatists and conservatives. How should the majority of the businesses (~68%) tackle DT?


The answer is simple: don’t start with engagement or enlistment, because these 2 gears are relatively new compared to acquisition and monetization. Most enterprises have a natural tendency to resist jumping into something new that they don’t fully understand. Although many brands (even the conservative ones) understand the need to engage, many practitioners are still being held back. Here are some of the most common reasons for their resistance.

  1. Lack of urgency: it’s a nice-to-have, not a must-have, so it can wait
  2. Lack of resources: both funding and human resources
  3. Lack of industry best practice (although this is changing as we speak): companies must learn to engage and manage customers (in the case of enlistment) who probably don’t want to have a relationship with the brand
  4. Lack of standard ROI models for different engagement and enlistment use cases (this is also changing)
  5. Incomplete measure of engagement: missing the depth dimension of engagement


In addition to the common objections for diving in with engagement, enlistment often faces a few extra challenges of its own.

  1. Unfamiliarity: most enterprises probably never even heard of enlistment, but related concepts, like crowdsourcing, is gaining popularity in business
  2. Lack of business processes for enlistment: successful enlistment requires brands to incorporate customers’ voices into their company’s routine operation, but many companies don’t have any of these processes in place
  3. Lack of control: enlistment require the business to collaborate and rely on customers, but the company has no control over what their customers will do or say
  4. Long time-to-ROI: even in cases where a clear positive ROI is demonstrable, it is only realizable much later, because it takes a long time to enlist customers

To overcome all these challenges within a traditional company is truly a herculean effort, and that is why those who did it deserve the fame and glory of heroes.


Where Should You Begin Your Digital Transformation Journey?

If your DT efforts were dismissed, perhaps your organization isn’t ready for prime-time engagement and enlistment yet. That doesn’t mean you should just sit and wait, because the price of doing nothing may be the end of your business. So this is where you need to apply a little behavior design or gamification to drive the adoption behavior of your organization.


starting point orig 640px.png One of the most powerful behavior-driving principles for large groups of people with disparate motivation is the concept of baby steps. In fact, this principle is so crucial that it’s one of the core tenets of successful gamification. The idea is simple and has 2 phases. First, if you want an organization to adopt something new and unfamiliar, it’s best to start from something that they already know and are already doing. The next phase involves building a ramp for your company to advance towards the final behavior outcome, and we will cover this in the next post.


If the final behavior is for your company to learn to engage and enlist your customers (which they haven’t started), then you should not start with these 2 gears. The fact that they have not started engaging or enlisting by now means that these 2 gears are probably too challenging for your organization. You must start with one of the gears they are already spinning—acquisition (marketing) or monetization (transaction).


In theory, it doesn’t matter which gear you choose to begin your DT journey, since the 4 gears is a loop anyway. In practice, however, it’s a lot easier to start with acquisition for several reasons:

  1. Most of the enterprises (even the pragmatists and conservatives) are either already doing some forms of digital acquisition.
  2. It’s much easier to create a customer-centric strategy around digital acquisition, and customer centricity is crucial to the long-term success of your DT initiative.
  3. There are also a lot more technologies in the market that can help you digitally transform your acquisition gear than do the monetization gear. If you don't believe me, just take a look at this marketing technology landscape infographic.


Digitally Transforming Your Acquisition Gear

Now that we have chosen to begin your DT journey with acquisition (i.e. marketing), how should you transform this business function digitally? I wish I could to tell you, but unfortunately, this is unique for every business. More specifically, it depends on your vision of what DT really means to your brand. And this can be very different for every organization.


Now, you might recall from the first vlog entry of this mini-series where we discuss the 3 most important failure modes that must be addressed at the beginning of every DT project. Addressing these failure modes has led to the 3 initial ingredients that are crucial to the long-term success of DT projects:

  1. A customer-centric strategy
  2. A clear vision of what DT means to your business
  3. The right technology that is fully integrated into your digital ecosystem and simple to use


Since we are beginning the DT journey with acquisition, we must make sure these 3 ingredients are present from the get-go. This can often be established with the 3 sets of questions below:

  1. Do you have a customer-centric acquisition strategy? Are you improving the customer experience (CX) when acquiring their attention on digital channels? Since a good CX during acquisition often means more relevant and personalized messaging, are your marketing content personalized? Are they hyper-personalized?
  2. Is your DT helping your business acquire more effectively and more efficiently? Since acquisition (marketing) is something that every company already does, there is an established standard to measure its performance. So are you improving the performance of your existing marketing efforts? Can you measure this improvement by standard marketing KPIs?
  3. Can the new technology be fully integrated with the rest of your marketing technologies? Does the technology simplify your marketing team’s work? Can your marketing team use the technology without much training? Does the technology increase the efficiency and productivity of your marketing team even factoring in the learning curve?

If the answer is “YES” for all the questions above, then the DT of your marketing operation is on the right track.


3 questions 640px.pngStarting your DT journey by engaging and enlisting customer is often difficult (though not impossible) for most of the traditional enterprises. Because these 2 gears are relatively new compared to the acquisition and monetization gears, many DT practitioners still get pushed back when starting with the engagement or enlistment gears. We can apply the principle of baby steps to increase the success rate of this challenging transformation process. This is accomplished by starting with the acquisition gear (i.e. marketing), because most companies are already familiar with marketing and are already doing it.


How you transform your marketing with digital technology is specific to your business, but it must contain the following 3 success ingredients:

  1. Improving the CX for your customers
  2. Improving the performance of your company’s marketing KPIs
  3. Improving the productivity of your marketing teams


Picking the right place to start is an important first step. Next time we’ll build the ramp that enables your company to take baby steps toward the final behavior outcome—thriving in today’s digital economy. And that will require all 4 gears (i.e. acquire, engage, monetize, enlist) to spin in sync.


*Image Credit: tpsdavegeralt, and HypnoArt.



Michael Wu, Ph.D.mwu_whiteKangolHat_blog.jpg is CRM2010MKTAWRD_influentials.pngLithium's Chief Scientist. His research includes: deriving insights from big data, understanding the behavioral economics of gamification, engaging + finding true social media influencers, developing predictive + actionable social analytics algorithms, social CRM, and using cyber anthropology + social network analysis to unravel the collective dynamics of communities + social networks.


Michael was voted a 2010 Influential Leader by CRM Magazine for his work on predictive social analytics + its application to Social CRM. He's a blogger on Lithosphere, and you can follow him @mich8elwu or Google+.

About the Author
Dr. Michael Wu was the Chief Scientist at Lithium Technologies from 2008 until 2018, where he applied data-driven methodologies to investigate and understand the social web. Michael developed many predictive social analytics with actionable insights. His R&D work won him the recognition as a 2010 Influential Leader by CRM Magazine. His insights are made accessible through “The Science of Social,” and “The Science of Social 2”—two easy-reading e-books for business audience. Prior to industry, Michael received his Ph.D. from UC Berkeley’s Biophysics program, where he also received his triple major undergraduate degree in Applied Math, Physics, and Molecular & Cell Biology.