It is that time of year again. Thousands of people after months of training prepare to run the London Marathon. Some of you will know from experience (the rest of us assume) that running a marathon requires a lot of hard work. You have to spend a lot of time training as well as making lots of small improvements to your lifestyle. In the sporting world, these marginal improvements accumulated over time can deliver impressive results.
It's known as the "aggregation of marginal gains", a method made famous by David Brailsford for Team Sky. Brailsford explains this as the 1% margin for improvement in everything you do. His belief was that if you improved every area in cycling by 1% it would add up to a remarkable improvement. He began to do this by optimising obvious things like the nutrition of the riders. Him and his team also searched for improvements in tiny areas overlooked by others. Brailsford believed that with this strategy Team Sky would win the Tour de France in five years. They won it in three. No British cyclist had ever won the Tour de France before.
This method is something that can apply to digital transformation. If you make small changes in specific areas of your business your transformation is likely to be successful. There is a common misconception that you do a big project, deliver it and say "great, we are now transformed" and it's done. It's never done. To transform your company there needs to be incremental changes within your organisation. You have to have buy in from the top to adjust the culture of your company as a whole.
Like running a marathon, digital transformation takes time, dedication and small vital changes.
We've put together a list of companies where digital transformation is approached as a marathon as well as some sprinters where the short burst of effort in one area did not pay off.
1. VUE Cinémas
VUE is on a three year road map to serve cinema goers better through digital products and upgrades. Dominic Rowell, Commercial Director at VUE states that digital transformation is not achieved as a department or as an individual.
It requires marketing, B2B sales, IT and technology, operations and property. He understands you have to be patient and take the organisation on a journey.
Google are on this list because they show how marginal gains can make a huge impact on company revenue. Google run 12,000 data-driven experiments a year to find small weaknesses and, thus, small improvements. For example, they tested 41 shades between 2 blues for its advertising hyperlinks. They found that a lighter blue generated more click throughs. This "marginal" change increased revenue to a netted extra $200m a year.
Last year Telefónica announced it was undergoing a digital transformation to put AI at the heart of the business. They are putting a "brain" in it's network with the launch of AI assistant Aura. However, their CEO warned that the company will need to transform and digitise every part of its business if it wants to take advantage of the opportunity. He states "We are not born digital, therefore digitising a company like [ours] is much more difficult than just being more digital." The company started the process of digital transformation several years ago to make it's physical assets, IT systems and products & services intelligent. It also required the company to simplify networks, tweak thousands of tariffs, radically digitalise processes and systems and switch off legacy systems.
Below is a short list of companies where digital transformation did not go to plan.
1. The BBC
In 2005, The Digital Media Initiative (DMI) was created to "fully prepare the BBC for the on demand digital world". It was a complex transformation programme aimed at changing the way in which the BBC makes content for its audiences. Central to its delivery was a technology solution that would allow BBC staff and partners to develop edit and manage video and audio content and programming on their desktops. DMI was cancelled in 2013 with an asset write-down of £100m. One of the key contributions to the failure of DMI was that the focus was on technology build and not enabling BBC-wide change. PwC was engaged to review the failed transformation programme.
In 2011 GE embarked upon an ambitious attempt to digitally transform its product and service offerings. The company created impressive digital capabilities, labelling itself a "digital industrial" company, embedding sensors into products, building a huge software platform for the Internet of Things and transforming business models for its industrial offerings. GE also worked on transforming internal processes like sales and supplier relationships. Some performance indicators, including service margins, did improve. However, investors did not acknowledge the transformation. The companies stock price has languished for years and their CEO Jeff Immelt - a powerful advocate of the company's digital ambitions - recently departed under pressure from activist investors..
In the early 2000s Prada decked out one of it's stores in New York with new digital technologies. The idea was to take retail into the digital age and enhance the experience for shoppers. These included changing rooms with transparent glass which dimmed when a person entered. They had screens so customers could check a size without having to actually try the clothes.
Soon the store became over crowded with tourists and gadget enthusiasts. Visitors increased but actual customers declined due to over crowding in stores. Also the tech at the time was not fit for purpose. Remember that this was the early 2000s - it was hard for customers at the time to grasp some of the technology. For Prada, this resulted in increased customer frustration and a sharp drop in brand image. It also managed to drive away paying customers which resulted in revenue fall.
Each successful example of digital transformation listed above shows a company wide shift in attitude with buy in from the top. They also showcase that approaching your transformation like Brailsford did with Team Sky is a more effective longterm solution than one big win...that will follow.