Every business claims it’s acting aggressively to seize the potential of digital technology. But through a combination of overuse and inaction, “digital transformation” in the mouths of many has become an empty cliché. As we approach the cusp of the third decade of the 21st century, the digital age has reached maturity. It’s time to reset our expectations and redefine what transformation really means today.
Market intelligence firm IDC estimates that 40 percent of all tech spending at companies will go towards digital transformations, with combined budgets exceeding $2 trillion by the end of this year. In spite of this near-universal desire to go digital, almost eight in ten CIOs claim their digital strategy is only moderately effective or worse, according to a 2018 Harvey Nash survey.
Here are four successful market leaders who were not dazzled by technology as an end in itself, but as a way to meaningfully reimagine how their organizations work.
The New York Times
Of all industries, publishing is perhaps the one that has been most deeply disrupted by the surge in digital trends. According to the Newspaper Association of America, the estimated advertising revenue for the newspaper industry has fallen from $49.5 billion in 2005 to only $16.5 billion in 2017.
Early on, The New York Times set itself apart by recognizing that embracing a digital transition would allow it to maintain its reputation for quality in the midst of profound change. In 2011, it implemented a subscription model and increased its non-newsroom workforce by over 100 dedicated tech employees.
This diversified approach has proven to be a success. As of 2017, print revenue represented a mere 17 percent of the New York Times overall revenue. Times CEO Mark Thompson has said that the company is on track to reach its annual digital revenue goal of $800 million in 2020. According to its January 2017 financial report the newspaper brought in almost $500 million in purely digital revenue, “which is far more than the digital revenues reported by many other leading publications combined.”
In a changing era of uniquely customer-centric experiences, JetBlue has differentiated itself by embracing high-speed internet, in-flight streaming, mobile payments, and other technological improvements. JetBlue CIO Eash Sundaram says the airline needs to be about customer service and technology as much as it is about getting passengers to their destinations.
According to Sundaram, JetBlue’s “mission is to have a transitional airport experience vs. a transactional airport experience.” Customers can now automatically check into their flights 24 hours before departure without ever logging into a computer or mobile app. In its first year offering the service, Jetblue processed 700,000 auto check-ins.
As a result of digital efforts by companies such as JetBlue, digitalization in travel industries is expected to create up to $305 billion for value for the industry through increased profitability by 2025.
While many B2C companies have risen to the challenges posed by the era of digital transformation, some B2B companies still struggle to adapt. Management consulting firm McKinsey & Co. has monitored the digital progress of an estimated 200 B2C and B2B businesses worldwide in order to measure the “Digital Quotient” of these companies and their industries. Their ongoing studies showed that B2B companies lagged behind their consumer-facing counterparts in overall digital maturity.
But not all B2B companies trail consumer companies in their transformational efforts. Massive multinational GE, for example, made a bold move towards an all-in digital strategy by investing nearly $1.5 billion in 2016 into markets emerging around the so-called “Industrial Internet.” To cement this digital transformation as the de facto way of doing business, GE assigned a Chief Digital Officer to oversee each of its business units, who, in turn, reported to Bill Ruh, the CEO of GE Digital.
“The model for the future is that the IT organization is going to shift to being the digital enabler for every industry,” Mr. Ruh told an assembled audience at the Gartner Symposium/ITxpo. “The CIO has to be the hero of the story.” Under Ruh’s leadership, GE’s has become one of the most well-regarded examples of flexible approaches to IT and business, where quick-moving digital units run in tandem with slower, more traditional teams.
“You can’t have this be a separate thing,” said Ruh in an interview with the Wall Street Journal. “It is going to be embedded in everything we do. You don’t go to Google and find non-digital employees. Every function, including finance, they are digitized, and they think that way.”
These strategic shifts can be difficult, but the rewards are immense. Challenging the traditional industrial thought process requires constant adjustment, learning new skills, and abandoning practices that may have been previously effective. GE’s software platform for industry, which included an incisive move into the cloud, was responsible for $4 billion in revenue in 2017 with a global workforce of over 4,000 employees. While recent pivots to strategy might mean that a smaller GE no longer needs a stand-alone digital unit, the company’s digital-industrial vision appears to have a long life ahead.
In the mid-2000s, pizza chain Domino’s had a sales and image problem. Its stock price had fallen to an all-time low of $3.85 a share in 2008. In response, the company revamped its entire product line with changes to ingredients, recipes, and overall quality. But it was the technological and e-commerce innovations that truly elevated the brand.
Domino’s changed its business model from a pizza company to an “e-commerce company that happens to sell pizza.” Today, Domino’s continues to accelerate its digital service offerings. Its voice order bot, Dom, launched in 2014, has logged half a million orders already. Challenges remain with the technology, but the restaurant has continued to offer customers the choice of ordering on their any of their favorite devices.
Domino’s CIO Kevin Vasconi places choice as the central pillar of the company’s digital offerings. Customers can place orders through any internet-connected device either on the website or simply by tweeting or texting emojis. “Choice drives our whole mobile and digital platform,” Vasconi says. “Millennials love that.”
This focus on technology as a way of reimagining pizza delivery is working. Today, Domino’s shares sit at $283 a share. The pizza maker generated $4 billion in ecommerce sales worldwide in 2016. Half of those sales reportedly came via mobile devices.
But don’t let Domino’s focus on devices create the wrong impression. Yes, these companies commandeered their own destinies by investing deeply in digital technology. But in all three cases, technological change was a manifestation of organizational redefinition. Transforming a company, digital or otherwise, means rethinking who you are. The rest will follow.