A Common Outcome to Digital Transformation

A Common Outcome to Digital Transformation

New technologies can lead transformation, but management and culture have to follow.

Digital transformation means that organizational changes must happen. If you want significant improvements in corporate performance, you need to change your culture and how you operate.

Those improvements may mean increasing revenue or cutting costs. Or perhaps it means improving the knowledge sharing in an organization.

Digital transformation is change built on technology. Currently there are four prominent technologies – we refer to them as AMPS.

  • Analytical tools and applications
  • Mobile tools
  • Platforms (to build shareable digital capabilities)
  • Social Media

Organizations are using these tools to become more digitally efficient.

While technological and organizational change are necessary, neither is simple.

Most companies in traditional business sectors acknowledge the need to digitize. But many are unclear about how to do it.

Some companies may already be making sophisticated use of AMPS, but struggling with the organizational change.

Others may be transforming the way they do business but struggling with the technology aspects.

There is no single correct way to digitize. Let’s look at three companies that took separate but successful approaches:

Burberry: From tired brand to digital powerhouse
Burberry is a British manufacturer of luxury outwears and fashion accessories.

By 2006 they had lost their allure. Their heritage, products, pricing, and store design were inconsistent and outdated.

To regain control, Burberry turned to digital. The company redesigned its website. They launched online campaigns and fully engaged in social media. They also revamped their stores.

It rejuvenated its workforce by training in-store staff to use digital tools such as iPads and radio frequency identification (RFID) tags. Employees were kept informed of new initiatives through webcasts, videos and chats.

A new internal platform allowed employees, suppliers, partners and investors to link up. They were all encouraged and incentivized to use it.

Burberry began spending more than 60% of its marketing budget on social media such as Facebook and Twitter. This spend is triple the industry average.

Their Twitter, Facebook and YouTube sites now attract millions of viewers.

Starbucks: Using digital to transform customers’ experience
In the mid-2000s, Starbucks’ sales were declining and they were forced to close many stores. On a digital level, the company was far behind its competitors.

Store managers did not even have company email!

Starbucks CEO, Howard Schultz, wanted to transform customers’ in-store and online experience. The company named a head of digital ventures, a new position, whose first move was to offer free Wi-Fi in Starbucks stores.

In 2012 the company booked $3 billion in payments through its loyalty card. Starbucks led the way in mobile payments by processing three million mobile payments a week.

Close engagement with customers allowed them to collect over 50,000 innovation ideas. Now, more than 90% of all US Facebook users are either a Starbucks fan or friends with one.

Customer insight and business change led Starbucks’ digitization.

Most of its solutions used existing technologies like Wi-Fi, mobile payments and social media. However, it successfully integrated these technologies to improve customer engagement and operational efficiency.

Novartis: Changing the sales model
Pharmaceutical company, Novartis had a rigid selling model.

Sales representatives made 8-10 visits to doctors every day to communicate company priorities and drug-related information. But they collected little information about patients. The company had no idea which drug was being used, or when.

Things began to change in 2010.

First the company equipped its 25,000 sales representatives with iPads.

Then it introduced a device, called LaunchPad, which completely changed the selling model. LaunchPad allows sales reps to pull up any information needed during a sales meeting. Sales reps are able to launch anything from interactive graphs to patient case studies. They can even call a specialist at headquarters.

During this time, Novartis extended use of a flexible cloud-based customer relationship management (CRM) system. This gives the sales field the digital tools and content needed to engage doctors in more meaningful discussions.

Novartis is changing how they operate at their core.

They are improving customer interaction. And they are raising the morale and daily productivity of the sales force.

Changing the Culture
There is a common thread across these companies beyond going digital.  Each of these companies forced an organizational change.

To do this, each company had strong leadership and vision to see the threat of disruption, and to push through the inevitable resistance.

Talent and investment issues were addressed. AMPS technologies require new skills and often require large capital expenditure.

New technologies can lead transformation. But the management and culture have to follow.

Donald A. Marchand contributed to this column. He is a professor of strategy execution and information management at IMD. He is co-Director of IMD’s new  Leading Digital Business Transformation (LDBT) designed for business leaders and senior managers from all business areas, who wish to develop a strategic roadmap for digital business transformation in their organizations.

Michael Wade is a Professor of Innovation and Strategy at IMD and the Cisco Chair in Digital Business Transformation. His interests lie at the intersection of strategy, innovation, and digital transformation.

Digital disruption is redefining industries. Learn more about the Digital Vortex.

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