Achieving User-Centric Digitalization

By Jacob Johansen, Principal at Strategy& with PwC China

‘China’s Economy: Key Trends in 2022’ was published in the fall 2022 edition of the German Chamber Ticker. Editor: Noga Feige, Senior Editor of Ticker Magazine. Visuals: Matter Design. 

China is the world leader in digitalization and digital user experience. Multinationals invest significant resources in digitalization to level with the competition. However, this is not ‘risk-free’ like many assume, because nobody actually needs ‘more digital’ – What we all need is what digital does for us.

In other words, digital transformation is not the solution, but a tool to fulfill needs. The question is – who’s?

Different objectives can inspire digital transformation: some transform to optimize internal processes and create more simple, agile, cost-effective operations and supply chains; to others, the goal is direct sales, improving customer service, and building community and brand loyalty; some wish to improve data collection, access, and analytics. In some cases, the objectives driving digitalization combine all these goals.

In the first case – driving digitalization to optimize operations – it is understandable, and potentially more plausible, that the perspective is internal and predominantly driven by internal KPIs. In the other cases, driving transformation from an internal, inside-out perspective, can come with a certain level of risk. In this article, we will focus on the latter.

The Risk of an Inside-Out Perspective

It is not without risk to drive digital transformation primarily from an internal point of view – especially if a company wants to improve consumer engagement or the user/brand experience. In some cases, the application of technology results in a negative impact on the business’s ability to connect with consumers. For example: In their desire to accumulate data and ‘own the customer,’ some companies force their users to pre-order through APPs or mini-programs. When it comes to F&B, this might mean a substantial waiting time and an inability to serve spontaneous customers, e.g., when picking up a coffee to-go from one of China’s many new, innovative coffee shop brands.

In this instance, digitalizing operations makes sense from the company’s internal point of view. Yet, it’s not offering an improvement for all customers. Instead, some feel deserted and accordingly frustrated, unable to purchase what appears to be a simple product in a way that is convenient for them.

In another case, the customers of an international fashion brand got frustrated when the chain launched its e-commerce platform in China to ‘supplement’ its physical retail operations. The two channels did not interact: consumers could not test products in-store and purchase online, or return goods in-store if bought digitally. Online and offline were not communicating, and even suffered from conflicting interests. Instead of offering a better user experience through digital transformation, the company created not one coherent engagement but two separate offerings.

These examples are all business-to-consumer, but companies with a business-to-business focus face the same challenges. Across B2C and B2B, we see digital transformation not fulfilling the ambitions due to the same commonality: they have been developed primarily from an inside-out perspective and often from a technology-driven point of view. It is the convenience of the company, its internal objectives, and in some cases, the fascination with new technology that inspires the solution—especially where digital transformation is driven by tech competencies only.

This is not to say that digitalization is bad or wrong – on the contrary. But the risk of being primarily tech-driven in digital transformation is to feed an inside-out perspective. Implementation and adaptation of new technology tend to concentrate on the internal needs and convenience of the organization – factors most consumers do not really care about.

Bring Business to People

“More digital” is not always better. You do not automatically improve your ability to connect and engage consumers through digital transformation. Thus, leaders must take a step back and apply an outside-in perspective on their digital transformation to avoid blindly digitalizing an operation or a brand away from its users, creating barriers between business and people. It may sound downright absurd, but it happens surprisingly often: companies wanting to shorten distances between people and businesses end up achieving the opposite result. That is sadly ironic, because one of the key attributes of digital transformations is precisely the ability to tear down barriers and ‘bring business to people’ – not only literally, like shopping from the comfort of your sofa, but also in a figurative sense.

Bringing your business to people may sound simple, but it represents a revolutionary potential if you live and lead by it.

Yet the inside-out perspective did not start with digital transformation. Before it became a buzzword, most businesses operated by a reverse movement: bringing people to the business. Think about traditional retail pre-Jack Ma and Co’s ‘new retail’ revolution. Many multinationals in China would strategize and conceptualize from the perspective of their narrow commercial interests and convenience. Original business concepts were designed almost exclusively from an inside-out perspective: store locations were chosen based almost solely on land price and the convenience of company infrastructure; stores were laid out not to provide the best possible user experience, but to force-expose visitors to the company’s full product range, despite this leading to a longer, slower, and less effective customer journey. The service design was dictated by existing recruitment and retention constraints rather than the other way around, and digital systems were applied only to lower costs through customer self-service or advertising.

When the tide of digital transformation reached these companies, their response was to approach it from the existing perspective: “We know what works for us, now, how do we digitalize it?” could have been the internal briefing. Rather than applying a fresh, outside-in perspective and analyzing the full range of opportunities made possible by digitalization, the understanding of digitalization was merely a technical tool to help us ‘do what we do – a little better.’ While there are many good reasons why companies worked this way, applying the same perspective to digital transformation today is questionable.

A Golden Opportunity 

To this day, many companies apply digital transformation as an add-on or upgrade to existing concepts. Because the perspective is inside-out, they end up evolving components in their operations rather than revolutionizing the entire business. This may be a lost opportunity: it is not often that companies get a chance to deeply evaluate the fundamentals of an operation, the company offerings, and the user experience. Often, leaders of multinationals abroad facilitate global strategies and models without being able to genuinely advance solutions to fit the Chinese market characteristics and its consumers. A digital transformation represents an opportunity to apply a more holistic review of what is needed to become or stay relevant in China.

The conceptual foundation behind the most significant leaders in digitalized businesses is to not only optimize existing models. Obviously, some of these aspirational companies had no “current model” to transform from, as they were born digital, making the process easier. Nonetheless, creating a new company or converting an existing one is defined by the perspective of the change manager.

The success of the most dynamic Chinese companies proves that. Chinese companies excel in using digital transformation as a golden opportunity, to both optimize and rethink how the business works from an outside-in perspective. In a market that used to be infamous for copying, it is worth noticing how the beacons of digitalized business models find inspiration not from existing models, but by applying an outside-in perspective and consequently striving to maintain focus on the needs of the world outside their organization. With this approach, these companies and their leadership have a source to understand the needs and demands of the future and their consumers.

Multinationals in China can find inspiration in this approach. Instead of seeing digital transformation primarily as a tech initiative, they should regard it as a naturally tech-heavy change management initiative, equally focusing on the consumer journey, user experience, brand & marketing, people & culture, and ESG.

Fulfilling Human Needs

Businesses that use consumers’ different needs as the engine for digital transformation develop better digital solutions that accommodate user needs rather than internal operations. The user-centric digitalization is effective, because it is fundamentally agile, unlike some tech-driven processes that lose focus, believing users are willing to adapt to the company’s will.

Most consumers do not prefer digital over convenience or speed. Instead of a mindless adaptation of technology, it’s essential to ask: what need are we not currently fulfilling? Technology serves to answer human needs. Nobody needs technology. We need what technology does for us.

Jacob Johansen is a Principal at Strategy& with PwC China. Since moving to China in 2002, he facilitated more than 40 international and domestic companies and brands to gain or regain momentum in their China operations.

He is also the author of the book “From Customer to User,” introducing the idea behind user-centricity and outside-in perspective in business. Contact Jacob at: jacob.l.johansen@strategyand.cn.pwc.com

PwC Strategy& China Digital Growth Center (DGC) is committed to supporting companies in building growth-oriented strategies and achieving growth results through digital transformation. DGC is a team of strategists, growth hacking experts, data scientists, experience and creative designers, digital technology architecture designers, and brand and marketing specialists, who complement each other and apply diverse and multi-faceted solutions to solve growth problems.