Managing Director & Senior Partner; Managing Partner, BCG Greater China
Some companies are reluctant to start implementing digital technology because they believe they lack the right mind-set and capabilities. With each passing month, their situation becomes less sustainable.
Related article: How to Jump-Start a Digital Transformation
By contrast, companies in a range of industries—including the five highlighted below—have begun to successfully transform their products and operations by taking a structured approach to digital. Rather than searching for the perfect strategy, they have committed themselves to a policy of quick action and experimentation, launching small-scale initiatives and then building up their digital capabilities through experience.
A multinational big-box retailer operating in an emerging market launched a quick-win initiative with a mobile app to boost declining sales at its physical stores. Rather than develop a grand digital strategy or conduct detailed market research to determine the scope of the opportunity, the retailer outsourced the entire app-development process so it could get something to market quickly.
The app included customer-friendly features like personalized coupons and offers, tools to plan shopping trips, automatic replenishment of regular purchases (though a subscription model), and in-store navigation. It resonated strongly with customers and led to increased sales at the retailer’s stores, especially once management learned what worked well and continued to add new features, such as in-store WiFi and home delivery of goods purchased online.
The overall initiative was so successful that the retailer extended the outsourcing arrangement for a second year, meanwhile hiring digital talent and building up its own internal capabilities in critical areas, such as customer analytics, mobile payment processing, app development, and coding. Eventually, it rebuilt the main app using internal resources and continued to refine and improve it over time. By outsourcing much of the process initially, the company was able to get an app in consumers’ hands quickly, build its digital capabilities over time, and learn from direct experience.
A telecom company that dominated its home market recognized the risks of commodification early. It knew that focusing on voice and data networks put it in danger of becoming a mere conduit for information, while digital start-ups built innovative mobile services that customers would access (and pay for) through its wireless network. To capture some of this emerging revenue in digital, the company began to leverage its wireless network to offer new services.
For example, the company developed a mobile payment service, a streaming-movie offering, and health care apps. A consistent theme across all these new services was that they served as platforms that other mobile developers could build on; that is, rather than building walled-off, proprietary services, the telecom developed an ecosystem that others could use to create even richer offerings. Yet the telecom retained control of the customer relationship, along with payment and authentication services. As a result, it had immediate access to customer data, which it could use to refine and improve its offerings.
Ultimately, the company revamped its IT platform to support the new service-based approach, and revenue from services grew dramatically.
A global insurer wanted to enter a fast-growing Asian market, but several initial efforts had failed. The company then developed a joint venture that would enter the market through a “Trojan horse”—a noninsurance product marketed under a new brand name.
Aware that a potential new demographic for insurance was pregnant women and new mothers, the company developed a digital device that pregnant women could wear to monitor the heartbeat of the fetus. The joint venture was staffed with a combination of employees at the insurance company and new hires who provided the needed digital capabilities, and it rolled out the product using quick, iterative cycles and customer feedback on prototypes.
In addition, the company created a website where women could monitor heartbeat data and exchange information with other expectant mothers. (Family members could also log on.) The site included original content from medical experts, and it was open to participation by other companies offering wearable technology. This approach allowed the insurer to establish a foothold in the market, which it then used to cross-sell its insurance products.
Critically, the joint venture was completely separate from the parent company, with different governance, financials, and technology. This allowed it to move fast and operate like a start-up, free from any institutional inertia on the part of the parent company.
A multinational automobile company wanted to use digital technology to improve its sales cycle. The management team studied the car-buying process and identified several “moments of truth” when customers were turning away rather than continuing to engage. Market research indicated that the company could improve sales by reaching out to customers through digital channels at those junctures, with more targeted marketing messages, vehicle specifications, and other information intended to win customers over. An early-stage, four-month test based on external technology was successful, but the company realized it didn’t have the right internal IT structure in place to roll out the new communication model. It therefore split its IT function in two: one section would support the company’s existing operations using traditional legacy systems, while another would move faster to develop cloud-based mobile technology and other digital tools that could support the new initiative. With the two-speed IT structure in place, the automaker would be able to roll out the new communication model across the entire company.
With digital innovators increasingly influencing customer expectations, a global bank embarked on an internal transformation with three objectives:
Drawing inspiration from innovative digital companies, the bank reorganized into mini-start-ups, with employees from marketing, product development, customer intelligence, digital channels, and IT working together in small, multidisciplinary, colocated teams. The teams were empowered to develop, test, deploy, maintain, and adapt customer processes and propositions according to their specific mandates. At the same time, the bank adopted a new governance system that ensured that the teams were aligned with the company’s larger business objectives.
In addition, the traditional manager’s role was replaced by product owners, expertise leaders, and agile coaches geared to building high-performance teams. This enabled the bank to reduce management layers and workforce size in functions like marketing, product management, and digital channels by more than 30 percent. At the same time, the bank attracted new talent from digital innovators outside the company to strengthen its internal capabilities in the most critical areas.