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4 Ways Entrepreneurs Can Embrace the Next Phase of Digital Maturity, 'Cognitive Transformation' Begin your journey now, or risk losing ground to nimbler competitors already on the road to cognition.

By Jaimy Szymanski Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.


In an era when "digital first" is table stakes for organizational survival, data-savvy companies are refocusing digital-transformation efforts on a new goal: cognitve transformation. Cognitive transformation is a term academics Gary Klein and Holly Baxter coined in the early 2000s to define the objectives needed to fill the gap between the knowledge a person has and the knowledge he or she still needs to perform a task.

Related: The Top 8 Digital Trends to Watch in 2017

In this context, "cognitive transformation" certainly applies to the digital arena: As a sign of market maturity, for 2017, worldwide spending on digital transformation technologies is estimated to hit $1.2 trillion, according to the International Data Corporation.

The bottom line: it's no longer enough to infuse digital into every aspect of business, from product, marketing and customer service, to day-to-day operations, governance and culture. Companies must now nimbly strategize around customer data in order to compete- -- not just with iconic innovators like Amazon, but with agile startups as well.

To stay ahead of the competition, therefore, businesses must move beyond digital transformation to the next phase of digital maturation: cognitive transformation, or the means toward integrating data, people and resources across all departments of a company internally, as well as across its ecosystem. Doing so is key to a company's ability to deliver the type of personalized and predictive experiences that people have come to expect.

The journey to digital maturation, then, begins with digital transformation, grows with corporate innovation and ends with true cognition.

If your business has a long way to go, don't get discouraged. The majority of companies have not even begun their digital transformation journey--but they do understand its importance. Here is a closer look at the steps an organization must take to successfully advance its digital transformation efforts.

Take a digital- and mobile-first approach.

By now, you've probably heard that more people are accessing the internet via mobile devices than by desktop computers. And that means a lot of accessing of the internet: Americans today are spending an average of nearly six hours a day consuming digital media, according to recent eMarketer research. Your website design and user experience, therefore, should reflect this, but so, too, should your customer-service approach and product innovation -- even the way you communicate internally. Everything you do should be driven by digital. Here's how:

Start from the top down. Company leadership must embrace and embody digital. Often, well-meaning companies attempt to ignite change by creating an "innovation task force," or putting "digital" in front of a few tech-savvy team members' titles. Digital transformation is not driven by grassroots efforts or change agents alone, however. Transformation starts from the top.

Related: Taking a Cognitive Approach With the Startup Ecosystem, Top IBM Exec Says

Work to understand your customers and improve the customer experience. Your company may be lagging in its adoption of digital, but odds are, your customers are not. Work to understand how your customers are using technology and digital channels. Are you selling to millennials? Those "digital-natives," and increasingly all generations, expect answers to their questions when they need them -- "on-demand" service, if you will.

In an August 2017 study by Altimeter, the research firm asked digital-transformation professionals in five countries where they were focusing their resources to implement digital transformation. The answer: Some 46.6 percent of respondents said they were investing in creating a seamless customer experience across all devices and channels.

Samsung, for example, in order to align with its growing customer expectations, prioritizes customer experience consistency across digital and in-store channels. The company has been doing this by first educating senior decision-makers on the importance of digital (buy-in from the top!), then continuously delivering incremental results tied to company and departmental goals, to showcase proof-of-concept.

Become a data expert. Cognitive transformation is key to an organization's ability to deliver the type of experiences customers have come to expect, such as personalization and prediction across devices and channels. According to the 2017 Personalization Development study by Monetate, 79 percent of the organizations that were looked at that exceeded their revenue goals over a 12-month period had a documented personalization strategy.

One of the most common places to start a cognitive transformation is to create a singular customer record across online, mobile and offline channels. That move will analyze customer data in one place, to offer customized and predictive products and services. Starwood Hotels does this well via its SPG loyalty program, to name one example.

Other companies, like Lowe's, are using data to drive new technology experiences. The company used applied neuroscience combined with eye tracking to test iterations of its virtual and augmented reality concepts. It's also using quantitative data to inform experience development rather than relying on a "gut feeling." This has resulted in the retail industry's largest longitudinal shopping study on VR/AR. Lowe's has further been iterating and improving its concept toward an eventual launch of in-store navigation via augmented reality.

Innovate, tirelessly! This is a broad and tall order, but the point is that digital transformation is a continual process. Technology, user behavior, customer expectations, the competitive landscape . . . all of these things evolve. You have to keep up, or better yet, work to stay ahead of the curve. Innovation should be a pillar of every organization and part of its day-to-day for every employee.

Typically with those companies approaching the cognitive transformation stage of digital maturation, innovation is part of their DNA. Consider Johnson & Johnson's JLABS, its effort to apply company resources toward scientific innovation, especially in health care.

With the JLABS facilities it's established in nearly a dozen cities, J&J offers (otherwise costly to acquire) resources, high-end equipment, year-round curriculum and resources for startups to conduct scientific research and experiments for a fixed monthly cost. The bnefits of J&J's digital transformation and corporate innovation maturity ripple its ecosystem: Young companies can access world-class resources while maintaining entrepreneurial freedom; and the resulting economic impact benefits nearby communities.

Related: Why Augmented Reality and Virtual Reality Will be Important for Your Business

Plus, Johnson & Johnson is gaining inspiration and sometimes even investment opportunities; and the improved pharmaceutical products and techniques resulting from this effort are benefiting us all.

In sum, companies have to take digital maturation seriously. For many business leaders, this means changes in processes, approach, technology and philosophies, but there is truly no time to waste. Begin your journey now, or risk losing ground to nimbler competitors that are already on the road to cognition.

Jaimy Szymanski

Research Analyst, Author, Speaker

Jaimy Szymanski is a research analyst, author, speaker and advisor, focused on organizational change brought by digital disruption. Zeroing in on the impact of technology on customer experience (CX) and behavior, Szymanski advises corporate leaders and change agents in managing digital transformation and innovation efforts to reach evolving consumers and employees.

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