Digital Leaders Take It All!
It’s an unfair world. Businesses that are already more digitally mature can use technology to innovate quickly and continue to further disrupt the market
Think about Amazon’s Just Walk Out technology or the Hand Wash Timer and Sleep Tracking feature on the new Apple Watch. These are groundbreaking innovations that help their parent companies maintain and enhance their digital leadership position. But not every company is a tech company like Amazon or Apple. The road to business transformation is less clear to traditional corporations that are less digitally mature.
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Why Conventional Businesses Must Innovate
The 20th century or even 19th century organizations still drive the major share of the global economy even today. But the largest firms in terms of stock market valuations are almost all tech firms or firms that have reinvented themselves in the last years. When it comes to digital transformation, most of the established large enterprises are lagging behind startups. Why? It’s because startups have technology embedded in their DNA. They are nimble organizations that have the agility to unsettle conventional players. Therefore, it’s critical for big, traditional firms to innovate if they don’t want to lose market share to digital startups and eventually go extinct like dinosaurs.
Six Digital Transformation Case Studies: Takeaways from Digital Leaders
To understand better, we must look at some of the traditional organizations that have successfully transformed themselves into future digital leaders. These firms have integrated new technologies in their operations and have brought tremendous improvements to their customer experience, business model, and overall business operations. These are the companies that are getting the optimum benefits of digitalization, not just through performance improvement, but also in terms of real bottom-line results.
The examples we are going to cover in this article include:
- Danish Oil / Ørsted
- Asian Paints
- Keller Williams
1. Danish Oil / Ørsted
Running Out of Gas: Back in 2012, Danish Oil and Natural Gas was Denmark’s biggest enterprise. In the same year, natural gas prices plunged by approximately 90%, sliding Danish Oil into a financial crisis since the company’s energy mix relied mostly on fossil fuels. Moreover, S&P, following the company’s financial situation, downgraded its credit rating to negative.
Reinventing the Business: To recover from the crisis, the company’s board replaced its CEO and hired a former executive from LEGO, Henrik Poulsen. Henrik’s approach was radically different. Instead of following the classical methods of crisis-management such as staff layoffs or cost reduction, he identified the space for changing the fundamentals of business. In other words, he and took the environmental disruption as an opportunity and decided to go for business model innovation.
Radical Innovation: Here is an overview of the key radical decisions he took as part of the transformation:
- The company was renamed to Ørsted after the legendary Danish scientist Hans Christian Ørsted.
- Ørsted divested from the oil and gas business, which shifted the focus heavily on renewables.
- Moving away from coal and towards biomass, enabled the company to exit coal in 2023 and have carbon-neutral power generation by 2025.
- Went for an IPO in 2016, which helped in fueling the growth & flexibility.
- Diversified the technology mix by re-entering into the onshore-wind market, storage solution, and solar PV.
- The company also started to utilize advanced analytics, artificial intelligence (AI), and the cloud to improve overall production efficiency.
Ørsted became one of the first companies to make a complete transition from black to green energy. The company has reduced its GHC emissions intensity by 67% and coal consumption by 82%. In 2018, Ørsted reported operating profits of DKK 30 billion, achieving an impressive year-on-year growth rate of more than 33%.
Key Takeaway: It’s crucial for digital leaders to identify a higher purpose and mission that galvanize the whole organization and drives all function towards a common goal.
2. Asian Paints
Inspiration from India
Our next inspirational example comes from a part of the world you probably won’t expect to write a digital transformation success story. Sometimes inspiration can come from the most unlikely places. Founded in 1942, Asian Paints is known as one of India’s most digitally mature manufacturers. In 2017 Forbes named Asian Paints as one of the world’s ten most innovative companies.
A Love Affair with IT
Information technology has been the pivot in the company’s growth. They began computerizing the operations in the 1970s. This was followed by the development and adoption of a series of innovative software applications for optimizing the customer experience and improving the supply chain.
A Problem to be Solved
Less than a decade ago, Asian Paints woke up to the fact that they had inadequate visibility into the complex and correlated factors that affected operations. It was too difficult and time-consuming to keep track of the intricate interdependencies that existed between people, machines, processes, and materials. There was a problem to be solved, a Job To Be Done (JBTD) Their answer: innovate!
Getting the Job Done
The company decided to integrate an enterprise-level smart solution that would use Artificial Intelligence to pull production data from hundreds of assets into digital twins of the production process.
The deployment of an enterprise-grade data analytics platform across manufacturing plant networks transformed production data into insights for increasing efficiency and productivity.
The initiative helped Asian Paints collect and analyze the data produced by machines across the company’s Indian manufacturing facilities. Using the data, the company was able to gather insights and implement process changes that led to better business decisions and increased returns.
Continuing its digital transformation drive, Asian Paints redefined itself as a home decor company from being just a paint manufacturer. Focusing on the new positioning enabled the company to transition from a product company only to a services company. Innovating the business model allowed Asian Paints to offer a wide range of home improvement solutions such as where they offer color, decor, and Vastu inspired solutions to customers.
Continuous innovation has transformed Asian Paints into a regional and global digital leader. In 2019, Coating World ranked Asian Paints 9th among the top paint companies in the world. Forbes has included the company in its list of the World’s Best Regarded Companies and the Best Over A Billion Companies in the Asia Pacific.
Takeaway: Business Model Innovation (BMI) is the key to unlocking the next stride of customer-centric innovation and technology-driven growth.
Codelco is the world’s largest Copper producer with annual revenue of US–$12.9 Billion. The company has been continuously innovating its business and processes for the most part of the last two decades.
What Drove Innovation at Codelco
In 2016, the mining industry faced the crisis of increasing copper prices. The demand in China and emerging markets like Brazil slowed down dramatically. Developed markets like Europe continued to underperform. And in the US the manufacturing activity was contracting significantly.
The industry outlook started to improve in 2017, but the margins were still not enough for a big company like Codelco to pursue any solid growth plans. Codelco had already been pursuing a digital transformation strategy for almost a decade when the crisis hit. The company viewed transformation as the only solution to the problem of low profitability and declining demand.
How Codelco Transformed
Codelco’s vision was to create a fully automated operations center and change the traditional paradigms of mining. Over the next couple of years, Codelco established a Remote Operations Center that provided constant operational support. Operators have back up for both monitoring and automation and have real-time access to automation specialists. Through the use of integration, automation, and data analytics, the company rearranged the mining process and realized the benefits of remote operations and a connected enterprise.
The Benefits of Automation
Operators are alerted in real-time of potential problems and can modify the process to prevent the loss of operation loss and continuity. The operators no longer have to see the plant physically, but can see the operations through cameras and screens. They can take the same actions that they would take locally, but their actions are better coordinated because they’re all in the same room.
By using remote operations and fully automated plants, Codelco fine-tuned production, improved the availability of equipment and system, lowered costs, and significantly improved the productivity of its teams.
Can’t Stop Innovating!
Codelco’s CEO Nelson Pizarro continues to spearhead an aggressive transformation and growth plan. Over the next ten years, the company will automate the operations of its mining fleet. Some of the key changes they plan are to incorporate driverless trucks and transport in their operations, shift from labor-intensive to on-site machinery, establish remote operation rooms, and redefine the entire operational approach.
Codelco’s digital transformation initiatives have delivered an unprecedented continuity of operations and delivered more than 45 million dollars per year in improved product quality and productivity.
Being a digitally mature corporation, Codelco was successful in converting the threat of rising prices into an opportunity for increased efficiency and productivity not just for itself, but for the whole mining and metallurgy industry.
Takeaway: Transformation is always ongoing. It’s a path you walk, not a destination you reach.
So far, we have discussed transformation examples from the manufacturing industry. Let’s now look at a few examples from brands that are a part of our daily lives.
From Macchiatos to Machine Learning
We all know Starbucks (my favorite is their Iced Caramel Cloud Macchiato). When talking about business transformation and innovation incorporating Information Technology, Starbucks clearly takes a front-row seat. The key to their digital transformation success is in their data analytics capabilities.
The company maintains tons of data about their clients. Using machine learning technology, Starbucks studies its customers to understand their buying choices so they can personalize their products and marketing materials.
The Digital Flywheel
Starbucks has coined the term ‘digital flywheel’ for its AI-driven strategy that keeps customers coming back. Just like a flywheel stores rotational energy, Starbucks’ digital flywheel software stores a wealth of customer data including data about their spending habits and preferences.
Using machine learning technology, the app’s backend learns to make automated decisions in complex, unpredictable environments based upon external feedback to provide a more personalized experience for app users. Their IoT enabled machines to collect more than a dozen data points for every shot of espresso pulled, from the type of beans used to the coffee’s temperature and water quality, generating more than 5 megabytes of data in an eight-hour shift.
The system’s AI mines the data to suggest new personalised food and drink choices for each and every individual customer. Starbucks continues to launch new store locations as well as innovation projects such as Deep Brew and Brightloom, diversifying into more fruitful areas and creating a blue ocean in which there’s competition.
Starbucks’ digital flywheel strategy has delivered mind-blowing results. The number of Starbucks Rewards Club members has grown at 15% year on year to reach more than 18 million at the end of 2019. One of the best rewards programs in the food industry now has over 10 million members in China alone.
So now even the coffee selling brand Starbucks identifies itself as a technology organization! It heavily uses machine learning, data analytics, and smart technology to enhance the customer experience as to achieve future revenue and thus business growth.
Key Takeaway: Starbucks started the transformation by using data to create a better customer experience. You should do the same!
5. Keller Williams
Digital transformation of the world’s largest real estate franchise business, you can read the full story here.
Keller Williams is the world’s largest real estate franchise ranked by agent count; and number 1 in the USA by sales volumes and units sold. They started their digital transformation in 2015. Till then they were depending heavily on third-party solutions so they decided to build their own proprietary software on their own. Keller Willams’ Innovation Drive
Empowering Real Estate Agents
The company invested in a CRM system; an AI-based virtual assistant like Siri, but for real estate; and a consumer application. The app enables real estate agents to conduct hyper-local market analyses to better advise clients, suggest the right parameters for an offer or estimate the probability of closing a deal. Behind the initiative, there were more than 36 years of rich historical data along with the best-in-class machine learning capabilities to analyze the data and produce actionable and relevant insights.
The digital transformation resulted in the continuous growth of Keller Williams with a stable 20+% year over year sales volume increase. All of this while receiving recognition as the World’s Most Innovative Company in real estate by Fast Company and one of the happiest companies to work for by Career Bliss.
Key Takeaway: You cannot innovate by doing the known and familiar or by using other people’s ideas. For Keller Williams, true innovation started when they decided to move beyond the solutions they were already using and decided to design a new digital ecosystem that was built around their needs.
“Digital is the new normal,” said Nike’s CEO John Donahoe in a recent interview, just as the sports and apparel mega-brand eyed estimated sales skyrocketing by 82% in Q-1 2021.Nike understands that consumers are hooked to digital, and they are not quitting any time soon. The company’s digital business now represents more than 30% of its total busines. How does Nike just do it?
Nike’s DX Strategy
Nike’s innovation strategy is driven by an ecosystem of apps, omnichannel fulfillment capabilities, and RFID inventory tracking. Some of the key elements of the digital transformation at Nike are:
- Social commerce: The numerous mobile apps and platforms create an ecosystem that integrates the social component with shopping-centric apps and covert customer engagement into sales.
- The App Ecosystem: The recently launched SNKRS app is intended for sneakerheads and offers limited-release, high-demand shoes for its most-engaged customer segment. The app joins a bunch of previously launched apps such as the Nike Training Club, Nike Running Club, and Nike Commerce. Nike uses these apps as a key source of ideas and suggestions for creating new designs for a bigger customer base.
- RFID Tracking: Nike is rolling out RFID technology to track hundreds of millions of items in its non-licensed apparel and footwear products. RFID gives Nike a complete view of its products and helps the company create a faster, more responsive and agile supply chain.
- Analytics: Nike uses its digital ecosystem to collect data in every interaction and in its different channels, to identify customers’ preferences, and to design new products.
When conventional businesses were losing sales because of the coronavirus lockdowns, Nike grew its digital revenue by $900 million in Q-3 2020. The company is all set to exceed analysts’ estimates and hit $10.6 billion in digital sales by Q-1 2021.
Key Takeaway: Digital transformation starts, ends, and restarts with your customers. The best transformation creates a cycle of customer feedback to continuously provide data and insights that can be used to create new products and launch new DX initiatives.
I hope you enjoyed reading the transformational and inspirational success stories we just shared. What are the most common factors that you can identify in all of these digital transformation examples?
For one thing, DX always involves the integration of technology into business no matter what business you are in. Successful transformation also requires leadership tenacity and courage to invest. A clear vision, strategy, and roadmap are essential to the success of any digital transformation project. Perhaps most importantly, all digital transformation must start with and revolve around the customer.
No transformation comes easy but the results of digital transformations well carried out speak for themselves. The first movers are often the best-run companies in the world. But we all can learn from these companies and examples and start creating our own transformative journey.
Do you need a partner to support you in that process? This is what we specialize in. And this is what we do every day. So be invited to reach out and ask us the “tough questions”!