11 inspiring case studies of digital transformation
- 88% of companies report they are undergoing digital transformation (source: Altimeter Group)
- 85% of enterprise decision-makers say they have a time frame of two years to make significant inroads into digital transformation or they will suffer financially and fall behind their competitors (source: PWC)
- 25% of companies have a clear understanding of new and underperforming digital touchpoints (source: Altimeter Group)
In other words, many companies report they are undergoing digital transformation even though most don’t know how to go about it.
Digital transformation is profound change in business activities, processes, competencies, and models to fully leverage customers at every touchpoint in the customer experience.
Successful digital transformation achieve these results:
- CUSTOMER: Harness customer networks and reinvent the path to purchase in line with their real behaviors
- COMPETITION: Rethink the competition and build platforms that deliver competitive advantage
- DATA: Turn data into assets that prove results in real time
- INNOVATION: Innovate by rapid experimentation
- VALUE: Judge change by how digital transformation helps create the next business
Since digital transformation doesn’t happen overnight, it also doesn’t hurt to show short-term wins along the way.
Need some examples? Here are 11 inspiring case studies of digital transformation.
- AMAZON BUSINESS: Served as an example of ‘digital customer’ expectations transitioning to the B2B world. Features include: free two-day shipping on orders of $49 or more, exclusive price discounts, hundreds of millions of products, purchasing system integration, tax-exempt purchasing for qualified customers, shared payment methods, order approval workflows, and enhanced order reporting among others. Amazon Business launched in April 2015, with over 250 million products and a more holistic marketplace for B2B companies.
- AUDI: Changed the way in which companies sell vehicles, with the introduction of an innovative showroom concept launched in 2012 named Audi City. Audi City provided a unique brand experience and allows visitors to explore the entire catalogue of Audi’s model range hands-on in stores located in city centers, where large showrooms are not a possibility. At Audi City London sales went up 60% from the traditional Audi showroom that previously occupied the site. Moreover, they only stock four cars, reducing the cost of having to hold a large volume of stock that often does not match a customer’s criteria.
- FORD: Was structured, in early 2006, as a loose confederacy of regional business centers and IT silos. From 2006 on, they moved forward with clear goals: simplifying the company’s product line, focusing in on quantitative data and quality vehicles, and unifying the company as a whole. On the IT front, Ford slashed the budget by a massive 30 percent. Their goal, however, was not to reduce expenses, but to take resources that were tied up in maintaining fragmented and complex legacy systems and free them for use in expansion and innovation. It was all of these measures together that gave Ford the agility and capital to invest in ground-breaking projects such as the much-lauded Ford SYNC and MyFord Touch.
- GENERAL ELECTRIC: GE’s Digital Wind Farm is an adaptable wind energy ecosystem that pairs turbines with the digital infrastructure for the wind energy industry. GE’s previous solution, Wind PowerUp technology, had already been installed in 4,000 units, and improved turbine efficiency by up to 5%, which translates to up to a 20% improvement in profitability for each turbine; the new Digital Wind Farm technology promised 20% efficiency improvements, which could help generate up to an estimated $50 billion of value for the energy industry.
- GLASSDOOR: Covered more than 450,000+ companies in over 190 countries and territories. More than 3,000 companies pay to use the company’s branding and recruiting tools (55,000+ free employer accounts). Glassdoor used its data for labor market research in the US; a portfolio of Fortune’s “Best Companies to Work For” companies outperformed the S&P 500 by 84.2%, while a similar portfolio of Glassdoor’s “Best Places to Work” outperformed the overall market by 115.6%.
- LEGO: After a period of expansion (1970-1991) LEGO suffered a steady decline (1992-2004) and by 2004 LEGO was close to bankruptcy. Reaching a tipping point, LEGO started restructuring and digital transformation focused on new revenue sources coming from movies, mobile games, and mobile applications. LEGO achieved an EBITDA margin of 37.1% in 2014, an increase of 15% since 2007. In 2014, the first LEGO movie achieved revenues of approximately $468 million with a production budget of only $60 million.
- MCCORMICK & COMPANY: Launched FlavorPrint, an online flavor recommendation tool that visually represents consumer’s tastes. Consumers start with a 20 question quiz about eating habits and food likes and dislikes. FlavorPrint takes this data and generates personalized suggestions about recipes using algorithms. It has been dubbed “the Netflix for food” for its ability to suggest recipes based on individual’s tastes. FlavorPrint has been such a success that McCormick spun off into its own technology company called Vivanda.
- MCDONALD’S: Recognized a massive shift in consumer behavior. For example, in 2015, McDonald’s began installing kiosks where customers can quickly customize their hamburgers. One of their more recent undertakings was for the 2015 Super Bowl football championship. McDonald’s used social media to give away products related to the commercials they aired throughout the game. It was important for McDonald’s to have the ability to respond immediately to consumers and actively monitor social media trends in real time. The effort was a success and drew over 1.2 million retweets including high-profile celebrities such as Taylor Swift.
- NETSPRESSO: Had the desire with its digital transformation to win new customers, gain a deeper understanding of its customers, and manage complex buying processes. But it was guided by the company’s clear goal: To provide customer’s with the perfect coffee experience. Netspresso’s initiatives are supported by a modern customer engagement solution based in the cloud, complete with network capability. Its cloud solution serves as an innovation platform with a full-fledged sales solution capable of handling the entire buying cycle: pricing, quotes, and orders. Nespresso’s digital initiatives have proven fruitful. Benefits include greater penetration into new markets, higher sales and user adoption, better sales productivity, and better visibility across the entire engagement cycle.
- STARBUCKS: COO Kevin Johnson perhaps sums it up best: “Where others are attempting to build a mobile app, Starbucks has built an end-to-end consumer platform anchored around loyalty.” The company’s main innovation is their Mobile Order and Pay app. This is fundamentally a customer-first strategy, as it addresses the basic wants of the consumer: convenience, line avoidance, and so forth. Coupled with their extensive loyalty program, the app gives Starbucks the perfect venue to up-sell and market to consumers. Furthermore, the app funnels back massive amounts of user data to the company, allowing them to better understand their customers’ habits and desires.
- UNDER ARMOUR: Wanted to become much more than an athletic apparel company when they introduced “connected fitness”—a platform to track, analyze, and share personal health data right to customers’ phones. This new application provides a stream of information to UA that enables them to immediately identify fitness and health trends. For example, Under Armour, which is based in Baltimore, was able to immediately recognize a walking trend that started in Australia. This allowed them to deploy localized marketing and distribution efforts way before their competitors knew what was happening.
Does this help explain digital transformation to you? Do these case studies relate to your business? Does your business need help with a digital transformation roadmap?
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About Rob Petersen
Rob Petersen is an experienced advertising and marketing executive and President of BarnRaisers, a full service digital marketing agency that builds brands based on proven relationship principles and ROI. He is on the MBA Faculty of Rutgers CMD and is the author of two books on digital marketing.
A leading consumer-packaged-goods (CPG) player was struggling to respond to challenging market dynamics, particularly in the value-based segments and at the price points where it was strongest. The near- and medium-term forecasts looked even worse, with likely contractions in sales volume and potentially even in revenues. A comprehensive transformation effort was needed.
To fund the journey, the company looked at several cost-reduction initiatives, including logistics. Previously, the company had worked with a large number of logistics providers, causing it to miss out on scale efficiencies.
To improve, it bundled all transportation spending, across the entire network (both inbound to production facilities and out-bound to its various distribution channels), and opened it to bidding through a request-for-proposal process. As a result, the company was able to save 10 percent on logistics in the first 12 months—a very fast gain for what is essentially a commodity service.
Similarly, the company addressed its marketing-agency spending. A benchmark analysis revealed that the company had been paying rates well above the market average and getting fewer hours per full-time equivalent each year than the market standard. By getting both rates and hours in line, the company managed to save more than 10 percent on its agency spending—and those savings were immediately reinvested to enable the launch of what became a highly successful brand.
Next, the company pivoted to growth mode in order to win in the medium term. The measure with the biggest impact was pricing. The company operates in a category that is highly segmented across product lines and highly localized. Products that sell well in one region often do poorly in a neighboring state. Accordingly, it sought to de-average its pricing approach across locations, brands, and pack sizes, driving a 2 percent increase in EBIT.
Similarly, it analyzed trade promotion effectiveness by gathering and compiling data on the roughly 150,000 promotions that the company had run across channels, locations, brands, and pack sizes. The result was a 2 terabyte database tracking the historical performance of all promotions.
Using that information, the company could make smarter decisions about which promotions should be scrapped, which should be tweaked, and which should merit a greater push. The result was another 2 percent increase in EBIT. Critically, this was a clear capability that the company built up internally, with the objective of continually strengthening its trade-promotion performance over time, and that has continued to pay annual dividends.
Finally, the company launched a significant initiative in targeted distribution. Before the transformation, the company’s distributors made decisions regarding product stocking in independent retail locations that were largely intuitive. To improve its distribution, the company leveraged big data to analyze historical sales performance for segments, brands, and individual SKUs within a roughly ten-mile radius of that retail location. On the basis of that analysis, the company was able to identify the five SKUs likely to sell best that were currently not in a particular store. The company put this tool on a mobile platform and is in the process of rolling it out to the distributor base. (Currently, approximately 60 percent of distributors, representing about 80 percent of sales volume, are rolling it out.) Without any changes to the product lineup, that measure has driven a 4 percent jump in gross sales.
Throughout the process, management had a strong change-management effort in place. For example, senior leaders communicated the goals of the transformation to employees through town hall meetings. Cognizant of how stressful transformations can be for employees—particularly during the early efforts to fund the journey, which often emphasize cost reductions—the company aggressively talked about how those savings were being reinvested into the business to drive growth (for example, investments into the most effective trade promotions and the brands that showed the greatest sales-growth potential).
In the aggregate, the transformation led to a much stronger EBIT performance, with increases of nearly $100 million in fiscal 2013 and far more anticipated in 2014 and 2015. The company’s premium products now make up a much bigger part of the portfolio. And the company is better positioned to compete in its market.