Blog. A little digital is like a little pregnant
The notion that the impact of digitization is disruptive has also reached boardrooms. All annual reports and investor presentations talk extensively about the digital strategy of the firm. Yet there are significant differences in approach. I often see the digitization of a small part of the value chain being presented as an integrated digital strategy. That’s not correct. Just like there’s no such thing as a little bit pregnant, a little bit digital is not an effective strategy.
If you’re active on Twitter and Facebook and use their logos in your ads, is that a digital strategy or just regular marketing with digital resources? Is selling products in a web shop really a digital strategy or an alternative distribution strategy? Is providing e-tickets not just a process improvement that makes ticket sales more efficient? It doesn’t lead to a different customer experience and doesn’t provide long-term competitive advantage. And supplying your sales team with an iPad with anytime, anywhere access to their customer data in 2016 is business-as-usual, not a digital strategy.
Incumbents that want to compete with real digital innovators, need a digital strategy that delivers more than evolution, more than a series of incremental changes in existing products and processes. What you need is a comprehensive roadmap to the future that describes what the company will look like in 3 to 5 years and how you will get there. With this approach to digitization, you will identify many new opportunities for each part of the business, that will lead to major changes in the company’s structure and culture.
Take the luxury fashion house Burberry, founded in 1856. At a first glance, this doesn’t appear to be a very digital business. They design and produce clothes and sell them through expensive retail shops. So what does digitization mean at Burberry? Let’s first go back to 2006, when Burberry was not doing very well at all. The consistency that is so important for a brand was hard to find. More than 20 different manufacturers were licensed to make Burberry products, even dog leashes. The shops all looked somewhat different and the prices were not consistent everywhere. Burberry was losing its luxury and exclusive image. You saw youngsters in poorly made (imitation) Burberry clothing. These days, Burberry is once again doing great. Burberry is the fastest growing luxury brand in the world and managed to double its sales and profits in the last five years thanks to a very successful digital transformation strategy.
Burberry chose a younger target audience (born early 1980s) that grew up in a digital world and sought to connect with them. Burberry became active on Facebook, Twitter and YouTube. During the “Art of the Trench” campaign in 2009 you could upload pictures of yourself in your Burberry trench coat, like the photos of others and give comments. Burberry fashion shows are streamed live and viewers can directly purchase what they like. They call this ‘Runway to Reality’. Immediately after the fashion show, the music is available in iTunes.
Many customers look online first and then visit the store to try things on and make the purchase. The physical Burberry store is designed such that it resembles the website, giving customers the same experience online and offline. There are interactive mirrors in which you can see yourself in a Burberry coat. Payment isn’t made at a counter, but via an ipad that advisers in the shop carry around. You can also design your own trench coat using the Burberry Bespoke service.
The Burberry transformation began with the centralization of marketing, technology and production. This not only restored consistency in the customer experience, but also provided a seamless connection between digital commercial activities (front office) and the operational processes (back office). Execution was brutal and with no exceptions.
Real digitization is disruptive
An effective digital strategy is disruptive and leads to a radically new way of value creation. New markets emerge as new customer experiences are fulfilled through new products and services. Digital technologies such as social media, mobile, big data analytics and the cloud inevitably lead to major changes in the way businesses serve their customers, organize themselves internally, and collaborate with other companies.
Size and a company’s history offer no guarantees for the future. There are numerous examples of newcomers who achieved a leading market position in a short period of time. Airbnb is larger than the largest hotel chain, WhatsApp replaces texting and Instagram flourishes while Kodak went bankrupt. Innovation is always a challenge for incumbents, but Burberry shows that success in the digital economy is not exclusive to start-ups.