We want to entertain you, inspire you and, most importantly, set you up for success when running your digital transformation.
To do that, we feature a host of brand new, in-depth case studies based on over 100 interviews with executives from a broad set of industries and geographies.
Get access to a load of practical tips, tools and a broad range of cases that show you how to succeed in real life.
As a sneak preview to the book where we feature cases and anecdotes from more than 100 companies, we’re sharing a select few with you here.
Click on the respective company logo below to learn about other companies’ journeys.
There's a lot incumbents can learn from start-ups, especially from those that have successfully disrupted established industries. A case in point is mobility start-up FlixBus, which illustrates why start-ups are often faster to react to new trends, and what established players can learn from that.
Digitization efforts need a clear strategy to support it, or else the digital transformation will fail to meet expectations. Read how Swiss car importer and dealer AMAG crafted its digital business strategy and dealt with potential conflicts between the old and new business models.
Defining and measuring the right KPIs can be a head scratcher – and even more so in a digital transformation, where different rules apply to different business models. Check out the case of BASF, the world's largest chemicals company, to learn how organizations best approach setting objectives and measuring performance.
Paramount to the success of a digital transformation are its people, and especially leaders. Reconciling a traditional approach to leadership with the leadership styles required to run a digital business can be tricky, though. World-renowned tire producer Michelin has mastered digital transformation leadership.
Running two businesses under the same roof often leads to conflicts. Learn how electricity producer Alpiq solved this challenge and how they adapted their organizational set-up to support a new digital strategy.
Following the deregulation of the interurban bus market in Germany in 2013, it was not an established incumbent that managed to profit most – it was a start-up that started from nothing. A few years later this start-up, called FlixBus, controls more than 90% of the long-distance bus market in Germany . This was a well-planned effort. FlixBus embodies the type of eager competition that traditional firms envision in their darkest nightmares. That’s why we wanted to learn more about this success story from Fabian Stenger, now Vice President Central and Eastern Europe at FlixMoblity (the parent that operates the FlixBus brand), who joined the start-up right at its beginning.
One key learning, and something that should worry incumbents, is that there is not much red tape stopping hungry start-ups from entering an incumbent’s market. FlixBus was not concerned about their lack of experience or absence of assets that could hold them back because they knew they could win over the market with a relatively simple recipe made out of two ingredients: a smart business model and speed.
When it comes to a competitor’s business model, it’s not necessary to have the best product to be successful and win over customers. It’s sufficient to have a good product that’s distinctively different from competitors, Stenger is convinced. FlixBus was the first to add a digital component to coach travel products. They realized sooner than anyone else that new trends like WiFi and online booking can be transferred to this dusty industry. Knowing that their competitors were lagging behind on these new technologies, FlixBus strengthened their digital footprint with the big data generated via mobile and website applications to gain new market insights and improve its own operations. It analyzed customer travel and booking statistics (for example, at which price points do customers actually buy), as well as the preferred routes (for example, which routes are requested most) and so on. Based on this information and a proprietary software to optimize prices and the route network, FlixBus entered the market with a competitive offering. However, because you can’t transport any customers without busses, and because it’s obviously impossible for a start-up to buy and operate hundreds of busses throughout Germany, FlixBus transferred another idea to the bus industry: instead of buying and operating all buses themselves, FlixBus decided to set up a partner model that allowed them to scale very fast.
As you can see, all it takes is a smart business model combined with intelligent use of data and new technologies and boom – established incumbents get into serious trouble.
As the case of FlixBus illustrates, there are a number of reasons why incumbents are slow to react (or why start-ups can do it faster):
Due to these aspects (and we haven't even discussed other problems such as culture), incumbents are often very slow to react and respond with a competitive digital offering. Of course, once the market is developed and the true potential of digital components becomes apparent, incumbents can make up some of the lost time by entering with large investments. However, they will always be laggards, reacting to moves of the attacker instead of proactively pushing the development. If the market is one where network effects are important, the start-up will have a first-mover advantage that makes it even harder for incumbents to catch up.
Start-ups sometimes have an unfair advantage – they will try to use their timing advantage to build up scale quicker and leverage it against competitors. If the market includes network effects, scale and data (insights) can create an unfair advantage for the attacker that will make it very difficult (and costly) for incumbents to compete. Last but not least, incumbents have to obey to different economics than start-ups: Start-ups are allowed to make losses over several years, which allows them to compete in a market that’s not profitable, while incumbents need to protect their profitability and explain themselves. As a result, they can’t compete on low prices and long-term KPIs (for example, scale instead of margins). This is exactly how FlixBus pushed out one incumbent after the other – and they are not done yet. They expanded into an adjacent industry and entered the long-distance train market just a few months ago – we will see how this plays out. (Courtesy of Fabian Stenger, Vice President Central and Eastern Europe, FlixMobility, personal communication, 20/02/2019)
Whenever incumbents set up a new strategy in today’s environment, there will be no way around the question of how digitization affects the overall company strategy, and how the firm can address both S-curves and deal with potential conflicts between them. AMAG, a Swiss car importer and dealer, found answers to these questions.
During the course of its corporate strategy development, AMAG was thinking about how to best integrate the digital transformation into their overall strategy. The management team knew that “digital” cannot be seen as something separate because it fundamentally affects the existing core business as well as the future business. Furthermore, it was clear that there was no easy way around it, as the digital transformation requires many organizational adjustments and the support of many people across the organization. So, the whole topic needs to be grounded in the strategy, and it needs to be one of the top-3 priorities of the organization. This is necessary so that initiatives get the support they need.
AMAG split its strategy into three parts – Now, which covers the current business (1st S-curve); Next, which covers adjacent new business opportunities close to the core (1st S-curve); and New, which covers completely new business in the future (2nd S-curve). The Now-Next-New strategy is not “just a digital strategy”, it is also the overarching philosophy of the whole corporate strategy. But how is the digital strategy embedded in these three parts?
“Now”, which covers the current business, includes all efforts aimed at improving the core processes, for example efficiency improvements and quality improvements. Digitization supports these efforts and allows to solve problems of the core that are not new to the organization but have existed before. “Next” covers new business opportunities that are very close to existing core business. In the automotive industry, adjacent business opportunities cover e-mobility, shared services and digital sales, digital service. Digital initiatives can help to expand the core and open up new value pools for the existing business. Note that all these points address the 1st S-curve, either through improvement (for example, cost savings) or enhancement (for example, new services). “New”, which covers new business models (2nd S-curve), focuses on products and services that do not yet exist on the market. Digitization builds the foundation for many of these new disruptive business models. Serious efforts require a conscious decision from and support of the supervisory board, because of their far-sighted nature.
The whole digital transformation should always start with the core, because this is what you need in order to make a profit for the foreseeable future. Also, the core is the area that provides the money to invest in “Next” and “New”. The core business needs to accept that it has to engage in long-term digital transformation and support (that is, funding) of initiatives that focus on “next” and “new” so as to secure the continued existence of the company, Philipp Wetzel, Managing Director AMAG Innovation and Venture Lab, argues.
Now the really interesting question, and the dilemma that AMAG and many organizations face, is, how do you deal with conflicts between those three parts of your strategy? AMAG looks at every potential conflict as an opportunity to improve the core. Cooperation with start-ups and work on disruptive ideas that can potentially harm the core business will cause conflicts and problems all the time, but this must be seen as a constructive process. AMAG gets challenged by start-ups and this forces it to stay active and to adjust its own course based on new insights. So, whenever the digital unit works on something that could potentially hurt the core, Wetzel tells us the message has to be: “We still invest in it, but the core has to stay active too and adjust accordingly so that they don’t get under the wheels.” This kind of thinking will likely be a challenge to many in the organization, but that’s a small price to pay for a territory that needs conquering. (Courtesy of Philipp Wetzel, Managing Director AMAG Innovation & Venture Lab, AMAG, personal communication, 6/05/2019)
Oil and water do not mix. This is something chemicals companies know better than anybody else. One in the know is Samy Jandali, Vice President Digital Business Empowerment at BASF, the world’s largest chemicals company. The oil-versus-water insight does not only make him chemicals-smart; it also makes him street-smart because it holds in a digital transformation impact measurement context too.
“There’s a stark difference between objectives and business cases for our 1st and 2nd S-curve investments”, Samy Jandali explains. “1st S-curve investments are based on a detailed analysis and business case. These investments in 1st S-curve digitalization efforts are irrevocable, whereas 2nd S-curve digital efforts are oftentimes characterized by fully reversible decisions based on market feedback. For those projects, we invariably need to make changes in direction and scope as we pursue them.” According to the VP, it would be impossible to build a waterproof business case for the 2nd S-curve because assumptions change frequently (for example, based on customer feedback during testing phases, leading to the development of different functions than originally anticipated). Instead of spending weeks on building a 1st-S-curve-like business case, a back-of-the-envelope calculation is much better suited for 2nd S-curve purposes. Estimating the future performance of the disruptive business is necessary but minimal time should be invested upfront in the business case and finetuning should be done along the way.
Another reason to limit the time spent building a business case and setting objectives is that success rates of new business models average around 10%. Traction for business models (and the chance at being among those winning 10%) is generated from testing MVPs, not from calculating potential returns after 7 years, based on a multitude of assumptions. “Multiplying uncertainty with the unknown is a useless equation”, Jandali says. “1st S-curve projects can be calculated based on experience, facts – numbers. But multiplying a vague EBIT in 5 years’ time with the likelihood of success of 10% does not make any sense for 2nd S-curve efforts, at least in the short run.”
Jandali suggests following a phased approach. Early on in the process, a classic business case and an estimation of target revenue and EBIT are simply not possible. “It’s OK and good to talk about ambition and aspiration levels but concrete targets are just wishful thinking. We don’t even know what initiatives we will end up scaling, so how could we possibly know how much they will contribute 5 or 10 years down the road,” the digital business builder comments. During those uncertain initial times, objectives need to be set along more reliably measurable, intermediary KPIs (for example, traffic, levels of satisfaction in the target group, website sign-up rates). The right sequence to focus on is: traffic first, then revenue, then profitability. Of course, these are in conflict with how traditional companies usually evaluate progress and decide on funding for next steps. “But using revenue or EBIT at this point would be fatal for all digital transformation efforts. Of course, we are a profit-oriented business and these traditional KPIs will matter in the long run – just not those first years. It’s important to communicate these intermediary objectives from the get-go, or else, when the going gets tough after two years, people start raising concerns and asking critical questions about profitability, when it’s still too early to do so. Giving it some time to flourish and prove itself is crucial”, Jandali concludes. (Courtesy of Samy Jandali, Vice President Digital Business Empowerment, BASF, personal communication, 23/01/2019)
You may know the tires. You may know the restaurant guide. You most likely know the chubby, friendly-looking Michelin Man. You may not yet know Eric Chaniot – the Chief Digital Officer of infamous French tire manufacturer Michelin.
When tasked with assembling his digital transformation team, it was of utmost importance for Chaniot to keep his digital squad as nimble and lean as possible. He leads the team as CDO. There is one layer of his direct reports – the digital transformation leaders. Beyond that there’s only their direct reports – the digital transformation team members. This ensures minimum red tape and maximum agility.
“60 or 70 percent of my direct reports were recruited from within Michelin. There are some exceptions, of course – like our Chief Digital Architect came from Salesforce, our Chief Data Officer from GE. But the majority have a long Michelin background. My direct reports held very senior positions before joining my team – just under executive level,” Chaniot explains. He trusts that their great network and excellent reputation within Michelin makes them bridge builders, ensuring buy-in from the core business for what the digital transformation team does. “These are very good leaders but, to be fair, they needed to adopt a new leadership style, given the kind of mode we operate in. It’s almost like they are now working in a new era. To get to that point, they got trained and were mentored. But most importantly, I always kept an open dialog between them and myself – I think this also helped the cause a lot. I bring the fresh external perspective and the expertise and experience in digital business building, while they bring the knowledge about Michelin and a great network. We complement each other very well.”
Overall, however, a solid 60 or 70 percent of his entire team, particularly driven by the layer below his direct reports, were recruited from external sources. These are digital natives who bring the functional knowledge and the experience with new ways of working. “Also, they don’t see – or choose to ignore – the complexities of a large organization, which is exactly the kind of mindset needed for our digital transformation,” he says.
This means Chaniot’s team is comprised of influential, well-connected executives from the holding company, experienced practitioners hired from outside the holding and specialists who bring the requisite functional knowledge. Freedom to source that talent as he saw fit was important for him to be able to assemble the best team possible.
Chaniot makes sure to point out the role of the set-up. “Sometimes you can hire or build all the right leaders and you are still doomed to fail because the set-up didn’t empower you and your team enough. Then it turns out it’s not a question of how smart you are or how apt you are as a digital transformation leader. It’s just a question of the set-up. That’s why I love reporting directly to the global CEO. No one ever tells me ‘that’s impossible’.” (Courtesy of Eric Chaniot, Chief Digital Officer, Michelin, personal communication, 27/02/2019)
When leading Swiss electricity producer Alpiq embarked on its digital transformation, they started with a team of three people. This team was given the task to find out what the word “digital” meant for the organization. After Alpiq had defined their need to act, it became clear that a dedicated unit was needed to get the transformation off the ground.
Alpiq founded a new business unit called “Digital Technologies and Innovation”. All digital initiatives that existed at that point were spread across the organization. In a first step, they were moved into the new digital unit (the “digital competence center” archetype). From then on, the digital unit had the overarching responsibility for all digital efforts within the core business. This gave Alpiq more oversight over its digital activities and control over previously uncoordinated digital investments of the individual business units.
But Alpiq did not stop there. The original analysis surfaced that the organization had to prepare itself quickly, before it got disrupted by others, and that digitization offered opportunities for Alpiq to disrupt others, too. With the newly founded digital unit, Alpiq was all set to digitally transform its core. However, Alpiq knew that to address truly disruptive ideas and business models, it would have to create another unit that was further separated from its core business. For this reason, Alpiq established the “Oyster Lab”, a second stand-alone digital business unit focusing on new disruptive ideas (the “standalone digital business unit” archetype).
When we compare the internal Digital Technologies and Innovation unit and the external Oyster Lab, we observe a number of distinguishing factors. First, the two are quite different in terms of innovation scope and strategic direction. The internal digital unit focuses on topics of “tomorrow”, covering all digital innovations close to the core business. The external digital unit, on the other hand, focuses on “the day after tomorrow” and thus deals with all digital topics unrelated to the core business. Second, the distinct strategic foci of the two require different degrees of separation from the mothership. Compared to the stand-alone Oyster Lab, the internal digital unit is only partially separated from the core; it is still within the mothership, although on a different floor and with more freedom than the traditional business units. The external unit itself was fully separated from the Alpiq infrastructure right from the beginning and the people working there were “allowed to do whatever they want to do”, as Markus Brokhof, former Head of Digital & Commerce at Alpiq, explains. This brings us to the next important difference: the internal digital unit, being attached to and responsible for the digital transformation of the core business, relies on core processes and structures. The Oyster Lab, as an external unit, has a much flatter hierarchy and only needs to follow a minimum of governance requirements. This separation and the degree of freedom that the external unit enjoys, is critical for its success. “The legacy and governance of the mothership would not be a good environment for the Lab. To give you an example, our core would not allow them to buy MacBooks and work on systems that are not compliant with our core IT. So, you end up with conflict after conflict, which would chase away all the digital talent, which is already hard to come by,” says Brokhof.
Employees’ innovation activities are, however, limited by the boundaries Alpiq set within its digital strategy. And the external unit has to regularly report to the Group CDO, who monitors the progress and reviews how the lab works towards milestones that were defined upfront.
The link between the two S-curves is established through reporting mechanisms, the CDO oversight and control, and regular management meetings between managers of the core business, the digital unit, and the digital lab.
As Alpiq illustrates, the overarching digital strategy should be translated into an organizational structure that supports it. The degree of separation and the governance mechanisms should be determined in line with the strategy as well. (Courtesy of Markus Brokhof, former Head of Digital & Commerce, Alpiq, personal communication, 15/02/2019)
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