Capgemini Consulting - Digital Transformation


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The rise of new digital technologies
is one of the most exhilarating challenges facing
companies today. No sector or organization
is immune from the digital phenomenon,
which dictates its own pace and presence in
the management agenda. The question is no
longer when companies need to make digital
a strategic priority – this tipping point is past
– but how to embrace it and turn it to competitive

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Capgemini Consulting - Digital Transformation

  1. 1. N° 01 JULY 2011 The challenges of the digital revolution • L’Oreal’s choices by Marc Menesguen • Transform to the Power of Digital: DigitalTransformation as a Driver of Corporate Performance by Capgemini Consulting • No sector is immune by Andrew McAfee, MIT • The boom of Chinese e-commerce by Brian Xin, StarryMedia • A transformed society is emerging by philosopher Bernard Stiegler
  2. 2. summaryeDitorial vision guest writerDigital and Transformation: No sector is immune from digital Digital as Bearer of AnotherAre they now indivisible? transformation SocietyBy Capgemini Consulting’s Interview with Andrew McAfee, By Bernard Stiegler, philosopher,Editorial Board principal research scientist at the President of Ars Industrialis, page 4 Center for Digital Business, MIT Director of the Pompidou Center Sloan School of Management Institute for Research and page 30 Innovation page 43strategyBeauty and digital: A magicalmatch Capgemini Consulting’sInterview with Marc Menesguen, Editorial Board:Managing Director of Strategic telesCope Pierre-Yves Cros, CEOMarketing for L’Oréal Tom Blacksell, UK Regional Head Chinese entrepreneurs take full Didier Bonnet, Global Head of page 6 Practices advantage of the e-commerce Patrick Ferraris, Global Leader, boom Technology Transformation Interview with Brian Xin, founder Xavier Hochet, France Regional Head of StarryMedia, a Chinese start-up Ton de Jong, Netherlands Regional Head for social marketing and digital Eric Roudil, North South EuropeClose-up research Regional Head page 36 Michael Schulte, Germany Regional HeadTransform to the Power of Digital: Ken Toombs, USA Regional HeadDigital Transformation as a Driverof Corporate Performance Coordination Editor: Claire ThiebautBy Didier Bonnet, Global Head ofPractices, Capgemini Consulting Design and Production:and Patrick Ferraris, Global Leader, Les Ateliers CorporateTechnology Transformation, Key figures Printing:SolutioncomCapgemini Consulting page 14 pages 35 and 42 Cover illustration: Fernando Togni Digital transformation review n°01 - 03
  3. 3. eDitorial Digital and Transformation: Are they now indivisible? By Capgemini Consulting’s Editorial BoardW elcome to the first issue of Capgemini Consulting’s Digital TransformationReview. The rise of new digital technologies the opportunities offered by these new tech- nologies and their related applications. While transformation is not just digital, transforma-is one of the most exhilarating challenges fa- tion cannot do without digital.cing companies today. No sector or organiza-tion is immune from the digital phenomenon, Second, digital is shaping the competitivewhich dictates its own pace and presence in battleground in all sectors. The data shows athe management agenda. The question is no growing performance gap between the best di-longer when companies need to make digital gital learners and the others. The more a sec-a strategic priority – this tipping point is past tor relies on technology, the greater the gap– but how to embrace it and turn it to compe- between the most effective companies and thetitive advantage. rest. And yet, the digital phenomenon doesn’t stop at the borders of «traditional» sectors. Di-Given this urgency, should we now view the gital technology allows a more targeted busi-rise of digital as the alpha and omega of trans- ness approach, more scientific decision-ma-formation strategies, the focal point for every king and a new type of customer relationship.aspect of corporate change? Our hypothesis is Companies in every business sector need tothat transformation strategy is its own master, master digital tools.but we have reached a stage where transfor-mation cannot be done in isolation from digi- We do think it is important to stress that thistal. There are two reasons for this. emphasis on a technology-driven digital re- volution in no way diminishes the importanceFirst, digital has a fundamental impact on how of human initiative and responsibility. Indeed,change takes place. Moving forward, every the truth is quite the opposite. It is more im-strategy that is devised must take account of portant than ever to acquire the right skills Digital transformation review n°01 - 04
  4. 4. eDitorialand place them strategically to support trans- Media, a Chinese start-up connecting marke-formation programs. ting and social media, offers particular insight into the speed of change in China today.In this publication we are determined to em-brace just this sort of complexity and coun- Finally, philosopher Bernard Stiegler providester-intuition, through a viewpoint that cros- the necessary distance for understanding theses geographical boundaries and domain social impact of the digital revolution, whichboundaries, with contributions from faculty he compares in the scale of human history toexperts, practitioners, start-up pioneers and the invention of writing.philosophers:Marc Menesguen, Managing Director of Stra- We hope you enjoy the thoughts and strongtegic Marketing for L’Oréal, explains how the convictions of all our revolution has impacted the organiza-tion and strategy of this global beauty pro-ducts leader.Prof. Andrew McAfee of MIT paints a pictureof how these digital technologies are disrup-ting work processes and corporate strategy.Along the way he describes profound changesin American consumer habits and their im-pact on traditional marketing approaches.The article by Brian Xin, founder of Starry- Digital transformation review n°01 - 05
  5. 5. strategyBeauty and digital: A magical match an impact on how our consu-Marc Menesguen, Managing Director of mers relate to information andStrategic Marketing for L’Oréal, explains advertising, and thus to our brands. According to a study byhow the digital revolution has impacted the Forrester group, 7% of sales around the world today takethe organization and strategy of the place online, and almost 40%global beauty products leader. of off-line sales are influenced by internet research. So almost half of purchases in the world are already somehow digitally H as the rise of the digital phenomenon changed your customers’ habits? influenced. This trend in any given country depends on its digital maturity. Digital transformation is one In the United States, where the of the major drivers of change phenomenon first developed, in today’s world. I believe we the internet plays a very signi- are witnessing the start of a true ficant role today in purchasing revolution, given how the major decisions and in how we sup- players are powering forward – port our consumers. This is a Google, Apple, Microsoft, Face- little less the case in Europe, book... – and the speed at which although things are advancing digital tools are proliferating. more quickly. And in the newer There are expected to be 20 markets digital technology has billion connected devices (tele- a considerable impact. In China, phones, tablets, game consoles, internet penetration is already etc.) by 2015. almost 30%. These changes are of fundamental importance to This revolution naturally has L’Oréal. Digital transformation review n°01 - 06
  6. 6. strategyHow does the company view you see emerging with digital The final opportunity involvesthis revolution? transformation? innovation. Research & Innova- tion is at the heart of the L’OréalDigital transformation re- First of all, digital transforma- model, and digital transforma-presents an extraordinary tion is a chance to strengthen tion helps our researchers’ work.opportunity to strengthen our our brands’ images by impro- For example, in the United Sta-current business model and be- ving the efficiency of our com- tes we have a social networkcome even better at being the munication and advertising. of 250 women who test ourworld’s number-one beauty cosmetic or facial care products,group. In fact, beauty and di- and give their feedback online.gital are something of a magi- “ The digital world We examine their reactionscal match, because beauty is an and take them into account multiplies the waysemotion and the digital world when designing new products. our brands can createmultiplies the ways our brands We have truly reached the stagecan create an emotional-filled an emotional-filled of co-innovation!relationship with their custo- relationship withmers. their customers. ” How is L’Oréal reacting to take advantage of theseAlso, using our products isn’t opportunities?always self-evident, and digi- Second, the internet is an ama-tal tools allow us to help our zing tool for supporting custo- Our Chairman and CEO, Jean-consumers understand and use mers throughout a product’s cy- Paul Agon, named 2010 thethem better, and to offer them cle of use, and for strengthening «Digital Year» for L’Oréal. Suc-personalized, one-to-one ser- brand loyalty. The third advan- ceeding in the digital revolutionvice so we can increase the tage is one of sales. The inter- is a major strategic challengequality and perceived value of net makes it possible for brands for the company at the globalusing our products. to project themselves right into level, along with winning one people’s homes, and generate billion new consumers over theCould you tell us more spe- purchases and repeat purchases coming decade. The year 2010cifically what opportunities through online sales. was therefore one of intense Digital transformation review n°01 - 07
  7. 7. strategyBeauty and digital: A magical matcheffort, particularly for a crisisexit phase, with strategic po-licies impacting our 23 brandsand all our countries.This mobilization was expressedin a number of ways. First, wemade sure we had the necessaryexpertise in-house. We formed ateam of 300 people specializedin digital technologies, withthe goal of providing digitalexpertise at every strategic pointin the company, and we havea global digital manager to pilotthis cross-functional networkwho reports to me directly.I would point out here thatdigital transformation doesn’tonly concern marketing; rather,we have digital managers in Marc Menesguen Managing Directorresearch, manufacturing, com- of Strategic Marketingmunication and in the sales for L’Oréalfunctions.We also launched a programto train 15,000 individuals indigital fluency in two years,including the company’s mana-gers. Digital transformation review n°01 - 08
  8. 8. strategyHave you defined measurable developing m-commerce, sales strategy. Whereas in the massobjectives for your digital via mobile phones. And within media model, typically centeredstrategy? Europe, the United Kingdom is on television, everyone received coming off the starting block the same message, with digitalWe plan to double investment first. media we can design muchin digital media in 2011, from more targeted marketing.5% to almost 10%. L’Oréal is the Marketing is key to L’Oréal’sthird largest advertiser in the business model. Has the tra-world, so you can imagine the ditional marketing mix beenscope of this goal. More gene- transformed by the emergence “ The real goalrally, I would note that we work of digital tools? is to raise ourusing a test & learn approach: digital IQ as aThe real goal is to raise our di- Of course. The difference way to structurallygital IQ as a way to structurally between the traditional modelreinforce our business model. and the new one that is emer- reinforce our ging, is a difference between business model. ”We have chosen specific units positioning and movement.within the group to play a pio- Today it’s not enough to thinkneering role. Their job is to about brand positioning. Digitalprepare the ground and assem- transformation allows brands I think this trend will becomeble the skills needed, and then to interact directly with their even more marked in the futuretransmit them to the other units. customers. This communica- with the rise of mobile devices,In e-business, for example, the tion requires an agility from which will become an increasin-luxury products divisions in the brands as well as an ability gly important interface betweenthe United States and Korea to remain in motion and adapt brands and consumers. Withare leading the charge, so they continuously. It’s a challenge, geolocation, for example, wehave gained a head start with but also an extraordinary op- can target messages more pre-6% and 12% of their sales on- portunity. In the new marketing cisely and adjust to customersline, respectively. Japan, on the that is developing, the consu- whether they are out shoppingother hand, is responsible for mer is even more central to our or at home. Digital transformation review n°01 - 09
  9. 9. strategyBeauty and digital: A magical matchDoes digital transformation priorities and guidelines. They greater proximity and interacti-increase the complexity of deploy integrated marketing vity, but in the end customersmanaging your brands? campaigns to ensure that the want the same thing: They want brand receives the same expres-L’Oréal is historically a compa- sion no matter what the pointny of innovation and conquest, of contact. “ We plan toso our teams are excited by this double investmentnew challenge. That said, like As for monitoring economic effi- in digital mediaany major change, digital trans- ciency, it has been strengthened in 2011, from 5%formation brings with it ques- with the creation of the Stra-tions and risks, two of which tegic Marketing division that I to almost 10%. ”come to mind. run. This organization is meant to support the markets in iden-The first is the risk of a frag- tifying best practices, and those to be surprised, seduced, drawnmented image and loss of brand that are less effective. We work in by a great story. Digitalequity, in the sense that multiple on aligning key performance transformation lets ad writerspoints of contact with a brand indicators for digital campaigns tell even more fabulous storiescan lead to divergences between worldwide, which allows us to to reinforce our brands.the global and the local. There is measure the effectiveness of ouralso a risk of insufficient return digital initiatives and organize Do social networks accentuateon investment, of our economic reporting of experiences and the risks of a negativeresources being spread thin. sharing of best practices. reputation?We are prepared to respond to Has the way you advertise The internet has held risks for re-these risks with a matrix struc- changed? putations even before the emer-ture for our 23 global brands gence of social networks. Thisand the large regions that pilot Whether on- or off-line, let’s risk is real, whether we like it orbusiness in the different coun- not forget that the main success not, and we are very attentivetries. Each brand develops its factor for a campaign is its crea- to it. We are part of the conver-own digital strategy with clear tivity. Digital channels allow sation, interacting ourselves Digital transformation review n°01 - 10
  10. 10. strategyon the internet around every- This is a significant aid in choo- gering 72% of them came fromthing that is said. This has been sing and buying cosmetics. emerging markets, which showspart of our company strategy how digital transformation lar-for several years already. In Human Resources, last year gely coincides with the geo- we developed “Reveal”, a re- graphic shift that is underway.How is your digital strategy cruiting website that takes We recruited 120 people inexpressed in other functions? the form of a business game 20 countries with this game. ( Research & Innovation, our I could give you similar detailsstrategy has always been based for Manufacturing, Corporateon proximity to our consu- Communications, and all themers around the world, with “ The difference group’s functions. The digitalmore than 3,400 researchers between the revolution truly impacts everyworking at 18 research centers traditional model area of the 12 countries. Digital techno- and the new onelogy allows us to achieve even that is emerging, Is the impact of the samegreater proximity, practically scope for every division? is a differenceentering consumers’ homes and, between positioningthanks to imaging technology, The impact is strong everywhe-we can get «inside their skin.» and movement. ” re, but is expressed differently depending on the business.Sales functions, for their part, Each division and each brandneed to integrate e-distribution The applicant enters L’Oréal develops its own digital stra-techniques. For example, we as a virtual trainee, takes tegy based on its specific cha-are testing on-line promotions. part in the activities he or she racteristics.We’re also taking part in a very is interested in – product inno-interesting experiment launched vation, marketing, production – The Luxury division sees digitalby Carrefour Planet, an interac- and receives a grade. Last year tools as an opportunity to createtive makeup counter where wo- 61,000 people participated from an image with incredible globalmen can apply virtual makeup. 160 different countries. A stag- consistency, but also as a way Digital transformation review n°01 - 11
  11. 11. strategyBeauty and digital: A magical matchto improve personalized service example, Redken, in the Uni- in this area, the Luxury Pro-and a path to increasing busi- ted States, designed a strategy ducts division, generates 6% ofness through e-business tools. for animating its network on its sales in the United States on-To date, this division has made Facebook, with highly targeted line. Where direct contact withthe greatest strides in imple- distribution of samples and ex- our customers through e-com-menting online sales. cellent return on investment. merce offers the greatest value, is in terms of marketing, andFor the Consumer Products di- In the Active Cosmetics division, assessing the effectiveness ofvision, the primary challenge is Vichy has developed a comple- our strategies. This higher awa-to optimize advertising impact. tely novel website for online skin reness also benefits our off-line diagnosis (, business, and thus our distribu- only made possible by the in- tor partners. The brands with “ Digital transfor- ternet. the best online performance are also those that sell best in sto- mation lets ad Finally, the Body Shop, which res, such as Kiehl’s. writers tell even is both a global brand and a more fabulous network of stores, has expanded What are the main successes stories to reinforce its online service and sales pos- of your digital strategy? our brands. ” sibilities with the internet. Lancôme had a number of di- Does this direct channel gital successes in 2010, both inDigital tools help generate more between the brand and consu- support of product launches andrelevant, targeted messages with mers bring your relationships through a very impactful colla-more content. with your distributors into boration with Michelle Phan, a question? video blogger in the United Sta-In the Professional Products tes. She is a huge fan of Lan-division, we have an extraor- No, not really. For one thing, côme, and became the brand’sdinary chance to enhance our e-commerce is still a fairly mar- online beauty advisor. Everyrelationships with our global ginal phenomenon. Our division month she posts a video withnetwork of hair stylists. For that has advanced the farthest advice that is seen by more than Digital transformation review n°01 - 12
  12. 12. strategya million viewers. They are so Apple has listed us among their It’s a challenge for all of us. Wesuccessful that five of the ten best apps! can legitimately characterizetop make-up videos on YouTube this as a cultural revolution.are hers! What lessons do you draw But the pioneering spirit is a va- from your failures? lue that has been shared by allLancôme has a similar ap- L’Oréal employees for decades.proach in China, with a social We haven’t experienced any Don’t forget that Lancôme wasnetwork called Rose Beauty. real failures, as every expe- the first luxury cosmetic brandWith 500,000 fans and more rience contributes to our digital to launch a website, in 1999!than two million posts per year, learning. However, we have no- One year later, we were againthe website is an excellent lever ticed some dispersion and frag- the first luxury brand to launchfor Lancôme, which I remind mentation effects in past years, an e-commerce website in theyou is the top luxury brand in with local initiatives that may United States! Today, digitalChina. have been very interesting, but transformation is an exciting were not entirely in sync with challenge that involves all ofIn the Consumer Products divi- the brand values. This led us our 66,000 employees aroundsion we launched Instant Beau- to strengthen the brands’ stra- the world.ty, a mobile phone application tegic priorities and develop in-that lets customers scan a pro- tegrated campaigns. The mainduct’s bar code in the store and lesson from these experiencesget complete information about is the need for consistency ofthe product and how to use it. off-line and online strategies:For Maybelline, we are also cur- Our strength lies in a compre-rently testing iAD, a new gene- hensive vision, and mistakesration of advertising for iPhone. mainly come from a lack ofIn particular, it allows very pre- consistency.cise targeting, and raises vi-sibility in the Apple universe, What are the reactions to thiswhich aligns with the brand’s transformation within the“hip” character. Especially since company? Digital transformation review n°01 - 13
  13. 13. Close-upTransform to the Power of Digital:Digital Transformation as a Driverof Corporate PerformanceBy Didier Bonnet, Global Head of Practices, Capgemini Consulting andPatrick Ferraris, Global Leader, Technology Transformation, CapgeminiConsultingDigital tools and technologies have invaded the businessenvironment, triggering significant changes in the way wework, communicate, and sell. Industries and governments alikeare undergoing a digital transformation either crisis-induced,as part of a core strategy, or as part of a more controlledbusiness transition. Under all circumstances, leaders needto be well prepared to anticipate the current and future impactof this enduring trend and steer their corporations accordinglyat the right speed.T he journey toward digi- tal transformation entailsharnessing its benefits - such journey depending on its starting point and the digital maturity of its industry and products or ser- An Enduring TrEnd AffEc- Ting EvEry indusTry… buT AT A diffErEnT PAcEas productivity improvement, vices. It is imperative for busi-cost reduction, and innovation nesses to remember that digital Over the past decades, digital- while navigating through the transformation is not just about technologies have progressivelycomplexity and ambiguity brou- technology. Instead, like any been embraced by organizationsght about by the changes in the other business transformation, a driven by advancement in tech-digital economy. roadmap across people, proces- nology, changing consumer be-We believe that every organiza- ses, and technology will enable havior, increasing globalizationtion is likely to tread a different organizations to successfully of the workforce, and a desirepath in its digital transformation navigate this transformation. to be more productive and inno- Digital transformation review n°01 - 14
  14. 14. Close-upvative (see Figure 1). This digi- Although the use of digital to- for the Internet it was less thantal wave has not only fuelled a ols in the enterprise is not a new 7 years, and for tablets it can benumber of fundamental changes phenomenon, what has changed expected to be around 4 the way organizations pro- in recent years is the accelera- This breakneck pace of techno-duce, sell, and serve, but also tion of both the capabilities of logical change has triggered newchanged the way employees these tools as well as the pace consumer behaviors and usagework, communicate, and colla- of adoption by customers, em- patterns which are having a pro-borate. It has therefore created ployees, and organizations alike. found impact on organizations.a leadership and transformation For instance, while mobile te- Simply stated, digital transfor-challenge for most industry par- lephony took around 13 years mation is the increasing adoptionticipants. to reach critical mass-market1, of digital tools and technologiesFigure 1: Digital Transformation of Enterprises Communication VoIP Smartphone UCC Telepresence Online Knowledge Collaboration Base IP-PBX E-mail IM Cellphone Video Conferencing LAN Voice Voicemail V based Mail Multi Channel Conferencing Optical Enterprise Pagers P Customer Interface Knowledge Social Snail Mail PBX Base Network In-Person Team Store Meetings Magnetic Fixed Line Phone Knowledge Online Physical Base Tele Fax Knowledge Base Netmeeting Channel Channel Livemeeting Door to White-boarding Door Sessions Key: Social Roadshows Typewriters Networking 1950 -1970 Physical Files PC Digital Early Cheque Laptop Days Credit Predominantly Cloud Tele Card Manual Cash computing 70’s & 80’s b -banking Manufacturing Tape Digital B Branchless Drives Progression Infrastructure B Banking CD Electronic Funds Semi Automatic ATM Transfer Manufacturing The 90’s Smart Digital E-Commerce Computer Aided Manufacturing Manufacturing Acceleration Storage as a 2000 - Present Tablet Digital m-Commerce service Transformation Commerce / Financial Source: Capgemini Consulting Analysis 1 Years necessary for an invention to be used by a quarter of the US population. 2 Capgemini Analysis; The European environment Agency, State and outlook 2010: “Accelerating technological change: racing into the unknown”, Nov 2010; Forrester Research eReader Forecast, 2010 To 2015 (US), July 2010. Digital transformation review n°01 - 15
  15. 15. Close-upTransform to the Power of Digital:Digital Transformation as a Driver of Corporate Performanceby an organization to funda- Faced with this transformation HArnEssing THE bEnEfiTs ofmentally alter both its internal challenge and the need to stay digiTizATionand external processes and func- relevant in one’s industry, lea-tions. All industry segments and ders have to embrace the impli- Digital transformation shouldgovernments have been touched cations of this enduring trend not be an end in itself. Like allby this new digital reality, which on their organizations in order other forms of business trans-has significantly altered mana- to steer their strategy and drive formation it should be guidedgement practices in areas from better operational performance. by clear managerial goals andhospitals to hypermarkets and Unfortunately, recent history is realizable business services to the future replete with examples of orga- Once a clear roadmap has beenof public services. As a result, nizations which have not been defined, digital transformationit has become a high priority able to keep pace with this new can help organizations addresson the leadership agenda, with digital reality. The recent ban- their most significant prioritiesnearly 90%3 of business leaders kruptcy of movie rental com- and achieve both internal andin the US and UK expecting an pany, Blockbuster, owing largely external benefits, in areas suchincreasing strategic contribution to its inability to rapidly hone a as innovation, customer expe-of IT and digital technologies new business model5, is one such rience, efficiency, or producti-on their overall business in the example. vity (see Figure 2).coming decade. With the Inter- Every industry is going throughnet, Hi-Tech, and Media sectors a digital transformation, some It’s About Productivityonly accounting for approxima- crisis-induced, some as part of Improving productivity is a keytely 10% of US GDP, we believe their core strategy, and some as driver for sustainable growth. Inthat the real transformation will part of a more controlled transi- recent years, productivity growthbe seen in the remaining 90% of tion process. Under all circums- in developed economies has been‘traditional’ industries’4, where tances, leaders have to steer their steadily falling and is signifi-customer and employee behavior corporations at the right speed, cantly lower when compared tois fast evolving. We can expect a taking into account the current emerging markets. For instance,largely similar trend in other de- and future competitive situation during the periods 1995-2005veloped countries as well. in their respective industry. and 2005-2008, Total Factor 3 Gartner: “Gartner CEO and Senior Business Executive Survey, 2010: Anticipating the Post-Recession Landscape”, March 2010. 4 Interview with Andrew McAfee, Author of Enterprise 2.0: New Collaborative Tools for Your Organization’s Toughest Challenges. 5 Blockbuster failed to effectively adapt its storefront model to online technology. Digital transformation review n°01 - 16
  16. 16. Close-upProductivity6 in the US and EU- thereby exerting additional pres- improve productivity by auto-15 nations grew at the lowest sure on productivity. In order to mating tasks, enabling betterrates when compared to deve- stay competitive, companies in decision-making, and freeingloping markets in India, China, developed nations need to find employees up to create value inCEE, and Africa7. On top of this, new sources of productivity if other areas. In the United States,we can add socio-economic they want to remain relevant on IT was responsible for two-thirdstrends such as the shrinking and the global stage. of total factor growth in produc-aging workforce. In Germany, There is clear evidence that im- tivity between 1995 and 2002Italy, and France, the working plementation of digital techno- and virtually all of the growthage population8 is expected to logies has been a key driver of in labor productivity10. Similarly,fall by 15%, 8%, and 6% respec- corporate productivity. Digiti- EU firms that adopt e-businesstively between 2010 and 20309, zation has helped organizations practices (such as online salesFigure 2: Key Benefits of Digital Transformation Internal Opportunities Drive organizational Reduce selling, delivery, and employee and service costs productivity by Accelerate time to leveraging digital tools External market External Opportunities Create new digital Opportunities Multichannel and integrated customer experiences products such as across mobile, social and Cost and Time Productivity consumer devices, online platforms Saving Improvement eBooks, and smart meters New New Customer Products / Experience Services Use tracking or Operational analytical tools to Extend service analyze customer offerings to behavior patterns Customer New technology enabled and generate Insights Customer Product Platforms platforms such as insights online and mobile Source: Capgemini Consulting Analysis 6 Total Factor Productivity Growth measures the Growth of GDP over the combined contributions of total hours, workforce skills, machinery and structures and IT capital. 7 The Conference Board Total Economy Database, Summary Statistics 1995-2011, Jan 2011. 8 Working-age population = 15-64. 9 Stanford Center on Longevity: “ Population age shifts will reshape global work force”, April 2010. 10 ITIF: “Digital Prosperity: Understanding the Economic Benefits of the Information Technology Revolution”, March 2007. Digital transformation review n°01 - 17
  17. 17. Close-upTransform to the Power of Digital:Digital Transformation as a Driver of Corporate Performanceand purchasing) are twice as li- mer acquisition cost on online novation and the main drivingkely to report enhanced produc- channels is 50% less than that force behind product and ser-tivity and expanded employment on offline channels13. Similarly, vice innovation across sectors.when compared with firms that when compared to call-center An EU-commissioned surveydo not use Internet technologies technical support, approximate has found that product andto innovate11. cost per contact is nearly 92% service innovation in most ofHowever, research12 points out cheaper for a virtual agent and the largest industries in Europethat while investment in digital 99.2% for web self-service14. is either directly related to, orcapital has a strong correlation The cost benefits of digitization enabled by, ICT16. Leading thewith high productivity, techno- span a whole range of indus- pack are the energy supply andlogy alone is not the most im- tries and functions. The use of telecommunications servicesportant driver of productivity. RFID tags in the supply chain sectors where 89% and 86%17Instead, it is a combination of a environment can help reduce of companies attribute productdigitally savvy corporate culture, inventory handling and logis- and service innovations to ICT.a distinct set of organizational tics costs. Remote health carepractices, and digital tools that enables monitoring of a pa-results in significantly higherproductivity. tient’s symptoms in real-time at relatively low cost. Smart me- “ In the US, in 2010, adoption ters can save utilities millions of e-business practicesIt’s About Saving Costs and of dollars by enabling them helped save companiesTime-To-Market to read meters remotely and $528 billion throughDigitization not only helps or- controlling demand. In the US,ganizations reduce operatio-nal, communication, travel, in 2010, adoption of e-business practices helped save companies efficiency gains ”marketing, selling, and pro- $528 billion through efficiency Digital tools also provide anduct development costs, but gains15. excellent platform to engagealso significantly accelerates stakeholders in co-innovation,problem resolution and time- It’s About Driving Innovation brand creation, and problemto-market. For instance, custo- Digitization is an enabler of in- resolution. Philips successfully 11 Information Technology and Innovation Foundation: “The Internet Economy 25 Years After .com”, March 2010. 12 MIT Sloan, Center for eBusiness : “The digital organization: seven practices of highly productive firms”, May 2003. 13 Forrester Research: “2009 Cost Of eBusiness Operations And Customer Acquisition”, May 2009. 14 Forrester: “It’s Time To Give Virtual Agents Another Look”, March 2010. 15 Information Technology and Innovation Foundation: “The Internet Economy 25 Years After .com”, March 2010. 16 Information and Communication Technology. 17 European Commission: “ICT and e-Business for an Innovative and Sustainable Economy”, 2010. Digital transformation review n°01 - 18
  18. 18. Close-upcreated a private online com- customers over multiple touch- improve retention, up-sell, andmunity, Sensorium, in 2007 to points, providing a seamless cross-sell, and anticipate theco-create better products with and integrated multi-channel success of new product launches.customers and deliver on-de- experience. Defining and for- National Instruments, a leader inmand insights to multiple pro- mulating a multi-channel stra- virtual instrumentation, has suc-duct teams. In the last three tegy also enables companies to cessfully adopted a web-analy-years, the community has hel- maintain a 360 degree view of tics solution for lead generationped Philips in identifying post- the customer and balance sales, and customer engagement. Bypurchase concerns, creating ef- customer care, and retention tracking on-site visitor behavior,fective product positioning, and across channels. Moreover, by NI has achieved a 3% increase inunderstanding technical speci- aligning organizational struc- the number of visits that reachfications for a new product18. tures and incentives, organiza- the point-of-sale21. tions can drive maximum value As outlined above, the businessIt’s About Transforming across all channels. In the UK, imperatives and benefits of di-the Customer Experience 76% of marketers have expe- gital transformation are com-Digital channels and platforms rienced improved brand expo- pelling and have to be addressedare helping organizations ex- sure, 68% better customer servi- at all levels in the organization.tend their reach to a wider and ce, and 62% increased revenue, However, the path toward digitalmore engaged ecosystem of cus- by adopting a multi-channel transformation is not without itstomers and partners. The high strategy19. challenges.adoption rate of mobile devices Today, more than 70%20 of alland Web 2.0 tools - such as so- digital information is consu- A TrAnsformATion wiTHcial media, collaboration appli- mer-generated and comes from iTs own cHAllEngEscations, smart phones and tablet outside the organization. Aidedcomputers - is changing the way by sophisticated analytical to- In order to identify the key bar-people share information, learn, ols, companies can leverage this riers in the successful imple-communicate, and interact. For ocean of information to extract mentation of digital transforma-each transaction, organizations better customer insights, maxi- tion programs, we conducted acan interact and engage with mize customer lifetime value, series of interviews with a num- 18 Forrester Research: “Case Study: Philips Achieves Consumer Proximity Using Private Online Communities”, January 2011. 19 DBG Report: “Multichannel Marketing Today”, September 2010. 20 2010 Digital Universe Study: “A Digital Universe Decade – Are You Ready?”, April 2010. 21 Forrester Research: “Case Study: National Instruments Replatforms Web Analytics”, November 2010. Digital transformation review n°01 - 19
  19. 19. Close-upTransform to the Power of Digital:Digital Transformation as a Driver of Corporate Performanceber of global corporations from ocean of data. Between 2009 pour an overwhelming amountacross different industries. Our and 2020, the amount of digi- of data into the digital ocean.analysis suggests that organiza- tal information created and re- The more information organi-tions across the globe are facing plicated in the world is expec- zations receive, the harder ita common set of challenges as ted to grow 44 times to reach gets to decipher what is crediblethey tackle these new digital an unprecedented 35 trillion and useful. Moreover, it beco-realities. These challenges can gigabytes22. In fact, according mes even more difficult to per-be broadly classified into four to estimates, more digital infor- form tasks and take decisions.categories (see Figure 3). mation was produced in 2009 Employees are unable to cope alone than all information since with the rising volume of infor-Manning the Information the beginning of time23. As inte- mation and this adversely im-Floodgates ractions become more frequent pacts on their morale and pro-The digital explosion has floo- and information-rich, custo- ductivity. A majority (62%24 onded organizations with an mers, partners, and employees average) of workers across the globe believe that the quality of their work is hampered becauseFigure 3: Key Challenges in the Path to Digital Transformation they cannot process and make sense of all the information at  Information flooding from multiple sources  The all-powerful customer their disposal fast enough.  Managing changing customer  Analyzing information for actionable intelligence sensitivities Though organizations realize  Developing the right social  Managing and securing large volumes of data media, Web 2.0, and mobile capabilities the importance of analytics, Change in many of them do not have the Information Overflow Customer Behavior skills - particularly advanced Key predictive analytical capabili- Challenges  Avoiding organizational and  Crafting a clear digital ties - to undertake it. Lack of technical silos Silo Based Organization/ roadmap at the top  Adopting a holistic approach Approach Culture Gap management level senior executive support, a silo  Workforce transformation  Change Management approach, an inexperienced workforce, and insufficient in- vestment are some of the big-Source: Capgemini Consulting Analysis gest roadblocks. 22 2010 Digital Universe Study: “A Digital Universe Decade – Are You Ready?”, April 2010. 23 MIT Sloan Management Review, 2011 MIT Sloan CIO Symposium. 24 LexisNexis Press Release:” New Survey Reveals Extent, Impact of Information Overload on Workers; From Boston to Beijing, Professionals Feel Overwhelmed, Demoralized”, October 2010. Digital transformation review n°01 - 20
  20. 20. Close-upKeeping Pace with Customer pany had to scrap the launch. of clarity around customer andExpectation In certain industries, such as social-media ownership, ina-The increasing proliferation of music, changes in consumer be- bility to tailor business modelsdigital platforms has funda- havior have completely disrup- catering to changing consumermentally altered the way cus- ted traditional models and ren- behavior, and failure to take antomers interact with brands, dered many players obsolete. “outside-in view” of their busi-research and buy products, and ness.influence the decision makingof other customers. Customersare increasingly becoming wary “ More digital information was Adapting the Organization and Cultureand distrusting of traditional produced in 2009 alone Alligning the existing corporatemarketing vehicles and ins- than all information culture with new digital realitiestead are turning to online so- since the beginning is one of the main inhibitors incial networks, blogs, wikis, and the digital transition of compa-community forums to formu-late their brand perceptions and of time ” nies. One of the clearest indica- tors is that a clear governancemake purchase decisions. To- Despite being faced with this process for the transformation isday, consumers trust consumers very visible customer expecta- often lacking. In our interviewsmore than they trust brands. tion challenge, many companies with CXOs, it has become clearWhile 50%25 of consumers do have been slow in developing that one of the major issues isnot believe in the advertising the right skills and capabilities the lack of accountability in di-promises of brands, 73%26 trust to manage this new customer gital transformation programs.the recommendations of friends sophistication. For instance, Further, enterprises’ traditionaland family. 56% of Fortune 50 companies decision-making systems areCompanies can no longer afford still do not have social-media too vertical and too intrinsical-to ignore the voice and preferen- icons on their home pages while ly slow to keep pace with rapidces of the customer. Customer 60% hide their twitter streams27. technology-driven transforma-backlash against GAP’s recently This failure of organizations to tion. Consequently, corporationslaunched new logo was so in- rapidly adapt themselves can be have started to experiment withtense on the web that the com- attributed to factors such as lack various organizational formats 25 “The future of advertising agencies: learnings from Forrester”, Feb 2010. 26 Forrester Research: “Three Ways To Find, Create, And Energize Advocates”, Sep 2010. 27 Adage: “Most Fortune 50 Brands Still Hiding Their Social Media”, April 2011. Digital transformation review n°01 - 21
  21. 21. Close-upTransform to the Power of Digital:Digital Transformation as a Driver of Corporate Performance- such as cross-functional tas- program, there can be inherent have responded to the impactkforces and identifying digital reluctance and resistance to of digitization through multi-leaders at board-level - in order change from within, especially ple, separate and uncoordinatedto adapt their culture to digital from middle management. Di- initiatives, even when the im-challenges. gitization results in the demo- pact is felt by the same brands,Far too many enterprises are cratization and free-flow of customers or employees. Func-investing in digital tools and information. Managers perceive tional silos frustrate interactiontechnologies without trying to this as a threat to leadership be- and create information silos,drive changes in the operating cause they have less control of making it harder to connect themodel, working practices, and information flows. For instance, right people in the right ways toculture. Companies often focus the US Department of Defence create and maximize value.too much on the technical and (DoD) had to face a lot of inter-customer-facing aspects of di- nal resistance during the formu- “ It is the obstacle togital transformation, forgetting lation of its social media policy is not technologythat true value can only be le- as the traditional military hie- thatveraged if we align people and rarchy and the network securityprocesses. As Raffi Amit, Pro- group were used to doing things digital transformation,fessor at Wharton, pointed out:“It is not technology that is the the old way28. It is important for corporations to have confidence it is people ”obstacle to digital transforma- in their employees by involvingtion, it is people”. An aging HR them closely in this journey and Similarly, a completely techno-infrastructure, non-alignment giving them ownership of pro- logy-centric approach often failsbetween business and HR lea- cesses. to challenge the fundamentalsders on the most critical busi- of a company’s business model.ness drivers, and ineffective Overcoming Silos This is because this approachrollout of change management Our discussions with organiza- aims to automate existing pro-programs to train employees on tions have surfaced a common cesses rather than attemptingnew digital ways of working are pitfall - adopting a silo-based a step-change in performance.some of the key barriers. approach, be it technical or or- In addition, technology-ledAs with any transformation ganizational. Many enterprises transformations often alienate 28 ReadWriteWeb: “U.S. Department of Defense Goes Social...Yes, Really!”, March 2010; Scout Comms: “The Department of Defense gained a social media beachhead in 2010”, Feb 2011. Digital transformation review n°01 - 22
  22. 22. Close-upIT from the business functions, traditional business models. Or- Strategic Leadershipresulting in significant resis- ganizations need to tread a ca- and Boundary Definitiontance to change. Digital trans- reful path toward digital trans- Digital transformation is aboutformation is first and foremost formation, crafting a winning leadership. It has become thean enterprise-wide business strategy and a clear roadmap ultimate challenge in changetransformation and technology across people, processes, and management because it affectsshould be seen as a second-or- technology (see Figure 4). not only industry structures andder priority. strategic positioning, but also allTo overcome the silo mentality, Figure 4: Navigating Digital Transformation: A Frameworkcorporate leaders should take aholistic approach, cutting across Digital Strategy & tranSformationall aspects of their value chain • Value chain positioning • Value proposition / Business modelsand management functions. As • Digital transformation strategy • Innovationwell as the many challenges Digital cuStomeroutlined here, this is as much people 2.0 experience analyticSabout a fundamental change in • Integrated talent • Digital Marketing • Customermindset. management • Multi-channel analytics • Connected management • AdvancednAvigATing your own workforce/ • Customer Experience segmentation collaboration Optimization • PerformancedigiTAl TrAnsformATion • Change management management/ Digital operationS • External partner training metricsOrchestrating your Digital • Target operating model • BenchmarkingTransformation • Process digitization • WorkforceDigitization can extend the • Digital business analyticsreach of organizations, impro- platformsve management decisions, and technology Strategy & tranSformationspeed the development of new • Technology roadmap • Technology • Technologyproducts and services. At the to digital governance and innovationsame time, overly rapid adop- • Information organization management strategytion of technologies can disrupt Source: Capgemini Consulting Analysis Digital transformation review n°01 -23
  23. 23. Close-upTransform to the Power of Digital:Digital Transformation as a Driver of Corporate Performancelevels of an organization (every achieve. Similarly, the Human methods can quickly be put intotask, activity, process) as well as Resources department must also “proof-of-concept” pilots and,the extended supply chain. Lea- be involved, given the impor- when successful, rolled out toders must constantly challenge tance of the people dimension the entire organization.their organizations to ensure in digital transformation. Digitalthat this technology-enabled transformation requires a mix An Outside-In View ofchange can unlock productivity of skills which are often scat- Customers – Re-inventinggains and significant competiti- tered across the enterprise and Marketingve advantage. At the same time, its external partners. To succeedthey should understand where in this quest, leadership should “ Many enterprisesand how the fundamentals of not hesitate to redefine the tra-their current operations could ditional boundaries between its have responded tobe unsettled by agile new en- different entities, making them the impact of digitizationtrants or new business models. permeable and porous. We see,A significant issue facing the for example, the marketing or through multiple, separate,top-management is that most commercial departments acqui- and uncoordinatedcompanies have traditional de-cision-making systems that are ring technical skills to address rapid technological changes. initiatives ”not well adapted for the digital Conversely, IT organizations areworld: they are too vertical, too strengthening their marketing Marketing is undergoing theslow to deal with the cross-func- and sales expertise in order to most fundamental change intional, technological and rapid better serve their companies. its history. The increasing em-nature of this transformation. Strategy formulation needs to powerment and sophisticationFor instance, when focusing on gradually move away from the of consumers - together withcustomer issues, you need the linear, annual process it once the proliferation of new chan-active participation of the Mar- was. Once strategic directions nels, digital technologies, andketing, Sales and IT organiza- are understood, senior executi- tools - is forcing marketers totions. However, historically, ali- ves need to steer their organi- rethink the way they operategnment between these different zations into virtual laboratories and the way they engage cus-functions has been difficult to where new applications and tomers. The result is an oppor- Digital transformation review n°01 - 24
  24. 24. Close-uptunity to dramatically improve think «outside-in» about their damental lever of transforma-the efficiency and effectiveness customers and markets. Instead tion. Leaders should focus onof investments in marketing, of thinking about finding cus- a clear people vision and try toadvertising, and channel mana- tomers for their products and bring about inherent changes ingement. solutions, marketers need to the way people work and colla-Traditional marketing focuses think about finding products borate. There are a number ofon increasing reach and fre- and solutions for their custo- key challenges along the way:quency by pushing information mers. They need to understand professionalizing and web-ena-and offers through a variety of what activities customers per- bling end-to-end people pro-loosely aligned channels. Howe- form as they evaluate, buy, and cesses throughout the organiza-ver, the future of marketing in a use their products and services. tion, fostering collaboration anddigital world is to develop and They need to think deeply about information exchanges betweensustain unique, personalized re- when and where they hand-off communities of knowledgelationships with customers by products, services, and infor- workers to maximize producti-collaborating and partnering mation to their customers. They vity and speed-to-market, andwith them through their own need to ask which activities they adapting traditional organiza-trusted networks. For instance, can perform better than custo- tion models to the new demandsin 2010, Coca Cola cut adver- mers. Conversely, they need to of the digital world.tizing spending on television ask what activities customers Digitally powered tools andby 6.6 % globally, and instead can perform better than the en- processes must be developed toinvested more on social media terprise. encompass the entire employeecampaigns via platforms such lifecycle. They should comple-as Facebook, Twitter, and You- People at the Heart of tely transform the way peopleTube29. The social media stra- Transformation join, learn, perform, earn, growtegy of the company is aimed at As in all forms of transforma- and leave the company. Leadinglong-term sustainable engage- tion, people need to be mobi- global organizations are alsoment, developing advocacy, and lized and engaged. Too often embracing Enterprise 2.030 to-encouraging brand loyalty. we see the technical nature of ols to foster a connected work-The new digital customer expe- digitization resulting in compa- force where new forms of col-rience requires that companies nies underestimating this fun- laboration generate significant 29 Socialmediatoday: “Coca-Cola Cuts Ad Spend by 6.6% and Invests More in Social Media”, March 2011. 30 Harvard Business School Professor Andrew McAfee coined the term «Enterprise 2.0» in 2006 to describe how Web 2.0 technologies could be used on organizations intranet and extranets. Digital transformation review n°01 -25