20. June 2017 ǀ Munich Ismaning

What makes a digital pioneer

Priority on transparency, the boss as driving force and going on the offense with customer orientation: companies have adopted digital strategies, but have yet to apply them consistently.

In this article:

  • Which industries will be most impacted by disruption
  • Who should make the decisions on digital strategy
  • Why customer focus is the alpha and omega of digitization
  • Why BMW digitized its product first

Ten to fifteen years ago, when Adrian Fischer spoke with people in the telecommunications and media sectors, talk was about one thing: digital transformation. “No other industry suffered as much from the effects of the Internet as publishing houses,” said Fischer, Managing Director of the executive consultancy firm Russell Reynolds Associates. Today’s media companies like Axel Springer cannot be compared with those from the pre-Internet era. Today, over 70 percent of first-quarter profits are attributable to digital businesses. Axel Springer saw nearly 600 million euros in profits in the last financial year, in which classified ad services such as real estate, job and travel websites grew by more than 16 percent. These are now just as much part of the portfolio as paid subscription services at BILD, Hamburger Abendblatt or WELT. The disruption has been turning industries on their heads.

1. Making products simple and transparent

According to Fischer, few of Germany’s pioneers in the digital transformation are consistent: “Companies define a strategic framework for digital transformation, but then only go as far as they need to stay in competition,” says Fischer, who specializes in the technology and digital sectors. There are only a few who are going for bold changes in their offers, business models or work processes.” But the current Russel Reynolds survey “Digital Pulse 2017”, with responses from over 1,500 decision-makers worldwide, shows that most industries can no longer afford to do this. Above all this applies to the health and financial services sectors, for whom the “danger” of falling victim to disruptive new business models has risen the most acutely – 16 percent in the health industry and 11 percent in the financial industry.

(Quelle: Digital Pulse 2017)

Fischer sees important developments for the health industry: “Complex illnesses will be more easily recognized in the future with the help of artificial intelligence and machine learning, unstructured images will be analyzed the way texts are.” Banks, too, will no longer be able to get around making their products simpler and more transparent. “Contract terms have to be understandable, and not hidden as footnotes deep inside the document,” says Fischer, who still doesn’t see the connection in many industries between transformation strategy and the “life” of the subject.

2. Let the boss do it

In most companies, the CEO is responsible for this. In 40 percent of the companies surveyed in Digital Pulse 2017, the decisions on digital vision and strategy are made top down from the executive office – in others, by the head of marketing (14 percent) or those in charge of the company’s digital business (10 percent).

(Quelle: Digital Pulse 2017)

But that doesn’t mean that all departments in a company share the same level of enthusiasm. Production, finance and HR, for example, apparently have little interest in stepping up as partner for digital initiatives in the company. In any case, less than 50 percent of those queried consider these departments to be partners in the company’s digitization. For production, it’s only 22 percent. “Digitization is clear in terms of strategy, but not established down the line, meaning that it hasn’t yet reached the company DNA”, Russel-Reynolds expert Fischer opines. Top-down decisions are now all the more important for implementing digitization. This is confirmed in the “Digital Maturity & Transformation Report 2017” from the University of St. Gallen in Switzerland. Here, companies which place special value on top-down decisions and innovations demonstrate a high level of digital maturity. Companies which place focus on IT and a bottom-up strategy are seen as digital stragglers. For this reason, 35 percent of CEOs in Germany are now leading the digital transformation of their companies, 11 percent more than in the previous year, according to a recent study by GfK and Yougov.

3. Learning customer orientation

Pioneers like the American companies Airbnb and Uber or myTaxi from Hamburg have shown how important it is in digitization to put customer advantages first. In direct comparison to the USA, Germans are simply lacking in “experience with user-centric approaches”, as a study by GfK and Yougov found. While only 14 percent of respondents in the USA recognized this as a challenge, in Germany it was 64 percent.

(Quelle: Yougov/GfK/etventure Studie 2017)

Researchers and entrepreneurs, however, are aware of the issue. Not least because of this, the University of St. Gallen assesses “customer experience” (in the context of process digitization) as the strongest of the nine dimensions comprising the maturity model, forming the “roof” of the graphically presented “maturity model” house.

(Quelle: Universität St. Gallen)

Is there a customer experience on all channels, is customer communication personalized, and are marketing measures based on analyses of customer and interaction data? These are some of the questions that companies must answer in the test. Along with media companies, the ICT, insurance and tourism industries have been revealed as pioneers. Medicine and health care industries demonstrate the least maturity. And the Digital Pulse 2017 study also reveals that digital strategies are oriented primarily toward customers. Three of the six subjects viewed as most important for digital strategy, for example, involve the implementation of tools — “customer experience and engagement” (77 percent), collection of customer data (71 percent) and (further) development of customer analyses (64 percent).

(Quelle: Digital Pulse 2017)

4. First digitize the product, then start on the company

The challenge: A company’s employees must also wrangle with the transformation to a customer-oriented business. Top executive consultant Adrian Fischer suggests a mix of “valuing the tried and true” and “selected, or better said, pinpointed promotion of the new.” Even if a shortage of digital skills is the Number 1 impediment on the road to digitization, this doesn’t mean that entire workforces should be replaced overnight, but rather that existing employees need to be “brought along” on the journey. “BMW’s transformation didn’t start in the HR or finance departments,” says Fischer, “and yet the new 5 Series and 7 Series are now fitted with modern entertainment systems.” And the customer senses the digitization, even if it’s still over the horizon inside the company.

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Autor: Andreas Schmitz ǀ 20. June 2017 ǀ München Ismaning

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Andreas Schmitz

About the Author

Andreas Schmitz

Journalist Corporate Media in Munich, many years of experience with publishing houses and agencies. Focus on storytelling and content marketing in the field of corporate media. Special affinity with technical and scientific subjects. Member of the founding editorial department of the management magazine CIO, former chief editor of the corporate portal SAP.info, development of various electronic magazines and online media