Here’s how to take charge of your digital programme without losing sleep – it’s easier than you think.
Does digital scare you? Do you have teams working on tech transformation, but still have no idea how to formulate a strategy around it? Writing for Harvard Business Review, Nathan Furr and Andrew Shipilov say digital “doesn’t have to be disruptive”.
Their advice: focus on the customer; adopt a flexible structure; acquire and protect new skills, expertise, and innovation; and take an incremental approach to digital transformation. That way, they say, you’ll do just fine.
FOCUS ON YOUR CORE
Digitisation doesn’t mean changing your core value proposition. As a senior exec at French fashion-retailer Galeries Lafayette says:
“We have been around for more than 100 years, and we have had to undergo other changes in history, such as the arrival of hypermarkets, shopping malls, specialty chains, fast fashion… and finally e-commerce… Customer needs remain the same as ever; the challenge is to find the best way to serve those needs using digital tools.”
Global shipping firm Maersk partnered with IBM and government authorities to deploy blockchain technology for fast and secure access to end-to-end supply chain information from a single source. The company improved both efficiency and transparency, but Maersk remains a shipping firm.
In 2010, Russian carrier Aeroflot had a Net Promoter score of 44%; by 2016, it was 72%. By designing and implementing a new “digital dashboard”, the firm was able to give managers instant oversight of 450 performance indicators, covering core operations like booking, scheduling and customer care. Data from sensors on planes improved timeliness for servicing, reducing outages and cutting costs. Aeroflot still makes money by selling seats on its planes – but now it offers its customers a better service.
Even where disruption strikes hard, your response doesn’t necessarily mean changing your core value proposition. Uber has disrupted taxi services worldwide. With its reputation for rudeness, Parisian firm G7 took a big hit. Now G7 has its own app which enables customers to book “sharing regular cab, green (hybrid or electric), van, and VIP”.
Crucially, unlike Uber’s “surge pricing” which sees cab fares multiply during certain times, G7 charges a uniform rate – and its cab drivers take etiquette lessons. It’s still a cab firm and the customer is king – “focus on the technologies that have the greatest effect on… customers”.
THE PHYSICAL STILL MATTERS
Digital doesn’t replace physical infrastructure – you need both, and they need to complement each other. Galeries Lafayette’s physical stores carry a select assortment of luxury products. Expert “personal shoppers” use tablets whose apps “remember” repeat customers, and carry in-depth product information to help staff build emotional connections with shoppers, and quickly access information about the items customers ask them about. “Hybrid models… put the customer at the centre of the business.”
With firms like Amazon and Google entering the market for the internet of things – with their smart home devices – you could be forgiven for thinking time is up for utility companies who’re now open to intense competition for domination of the smart-metering segment. But the utilities have the physical knowhow the tech giants lack – digital technology identifies a problem with a customer’s central heating system, and it alerts an engineer who contacts the customer to arrange a service call before the appliance breaks down.
“Seamless integration of physical and digital can significantly reduce visits and parts used while granting the customer peace of mind.”
PROTECT YOUR INNOVATORS
Buying and integrating startups is a means of acquiring new skills and capabilities quickly, but if you’re not careful, your corporate culture and processes will kill off the innovative spirit that made the startup an attractive acquisition in the first place. Buying startups only works if you also protect them.
Avnet is a $19bn global technology-solutions provider. Its two big startup acquisitions are Hackster.io, a platform for new ideas and innovations, and Dragon Innovations, which bridges the divide between prototyping and mass rollout of new products.
VP for emerging business Dayna Badhorn says semi-autonomous status protects these enterprises from inefficiencies endemic in the parent company. She acts as a conduit between the startups and the main organisation, guarding the startups’ freedoms, while acting as the catalyst for turning innovation into new business for Avnet.
Galeries Lafayette adopts a similar approach. After failing to capitalise on the innovations of its startup accelerator, it appointed a manager to act as a point of liaison – the firm doesn’t acquire new startups; it simply leverages their “ideas, processes, culture and technology”.
REORGANISE PEOPLE AND TECHNOLOGY
Harnessing the benefits of digitisation is about better serving your customers; getting the best from new technology often means reorganising your people to build agility into your business model.
Staff at global banking giant ING are seconded to “squads” to meet the needs of cross-company initiatives; funding assigned to the employee travels with them to the new appointment, enabling them to make decisions and act on them. If the initiative fails, the squad members simply return to their old roles, their careers unaffected. ING CEO Ralph Hamers says:
“We have to be honest about failures. We also have to be honest about all that we learned in the process and that by using a different approach, we learned these lessons in a fraction of the time it takes competitors.”
Not that transitioning to a squad-based structure is pain-free. ING fired all its employees over a weekend and had them “reapply for their jobs, through the lens of the customer need they solved”.
DIGITISATION SHOULD BE INCREMENTAL
“Experience suggests that attempts to replace multiple complex, mission-critical systems all at once nearly always end in disaster.”
Travel agent TUI implemented its digitisation strategy, upgrading its IT systems by coupling specially designed “middleware” to the old “backend”. Engineers took a modular approach, replacing old systems with new, and adding extra functionality as they went. This enabled TUI to continue to roll out its modernisation programme in diverse markets over the course of a decade, all while growing steadily despite implementing major change.
You can’t ignore the imperative to upgrade legacy systems, but by creating a temporary “middle-layer interface”, you maintain functionality while experimenting with and implementing digital platforms to support customers and satisfy their changing needs.
Think like Galeries Lafayette: digitisation is merely modernisation. If you focus your resources on making the customer experience better, adopt a flexible approach to organisation, and go for steady change over shock tactics, you’ll get the best from new tech and avoid the pitfalls of trying to do too much too soon.