Digitally Transforming Businesses
While not every digitally transformed organization ends up reshaping its entire industry, such companies are—on average—26 percent more profitable than their industry peers, as has already been noted. This fact alone has encouraged many organizations to examine areas where they can digitally transform. Some of these key areas include
Customer experience
Employee experience
Business operations
The following sections provide an overview of each of these areas, along with examples of industry leaders in each area.
Transforming the Customer Experience
Customer experience matters more than ever. And bad customer experiences can be fatal to a business.
For example, in 2011 Harris Interactive published a Customer Experience Impact Report that found that:
86 percent of customers will pay more for a better customer experience.
89 percent of consumers began doing business with a competitor following a poor customer experience (up from 68 percent in 2009).
79 percent of consumers who shared complaints about poor customer experience online had their complaints ignored.
50 percent of consumers give a brand only one week to respond to a question before they stop doing business with them.
Additionally, Forrester Research showed that a quarter of American consumers who had unsatisfactory service interactions in 2010 shared their experiences though social networks, which represented a 50 percent increase from the year before.5
Furthermore, an increasing number of customers are making purchasing decisions based on what their peers have to say, paying close attention to ratings, reviews, and testimonials on social-media and third-party sites and apps. As such, businesses have incentive like never before to leverage digital technology to provide superior customer service, as some of the following companies have demonstrated.
Burberry
In 2006 Burberry was lagging far behind its competitors. The high-fashion industry was growing at 12 to 13 percent per year, but Burberry was managing only 1 to 2 percent growth. Burberry’s new CEO at the time, Angela Ahrendts, decided to rebrand the company and focus on a new market: millennials. As such, Burberry undertook an aggressive digital strategy to reach this new customer base. It revamped its website and included an “Art of the Trench” social-media element where anyone could post pictures of themselves in their classic Burberry coat. Burberry partnered with Twitter to broadcast live fashion shows, and likewise partnered with Google to develop advanced “lip detection technology” so that customers could send digital kisses to loved ones anywhere in the world.
Burberry also complemented its online digital presence with extensive digital technologies in its retail stores, such as giant external and internal video displays in all its stores and by arming all its sales associates with iPads. Burberry’s fusion of digital and retail fashion is illustrated in Figure 1-6. Burberry even creatively combined RFID technology with its video displays, such that, for example, when a customer took a garment into a changing room to try it on, the RFID sensor recognized which garment(s) the customer was trying on and automatically signaled the video display in the changing room to begin playing a video of a fashion model wearing the same garment. This particular combination of digital technologies led to a significant increase in conversion rates to purchases. The net result of all these new digital customer experiences was the tripling of Burberry sales, as well as its share price, during Ahrendts’ tenure.6
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Figure 1-6 Burberry—Fusing Digital and Physical Retail
Starbucks
Starbucks has been well described as “a digital innovation machine.”7 It was one of the first coffee chains to recognize the value of offering its customers free Wi-Fi, along with content (delivered by partnering with the New York Times, The Economist, Spotify, and others), which dramatically increased the length of time its customers linger and relax at its stores, as well as the corresponding number of beverages they order. Starbucks launched its MyStarbucks app in 2009, as shown in Figure 1-7. This morphed into a multipurpose vehicle which includes the following:
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Figure 1-7 Starbucks—Mobile Order and Pay
Personalized advertising and promotions.
A digital replacement for a Starbucks card (and later fully integrated with both Apple Passbook and Apple Pay).
A Starbucks Store locator.
A reward-management system. The MyStarbucks Rewards program boasts over 20 million members and accounts for over 20 percent of transactions.
A Mobile Order and Pay service that allows busy customers to “skip the line” by placing their order and paying for it while on their way to a Starbucks and then having their beverage and food ready and waiting for them to pick up and go. The Mobile Order and Pay customer experience resulted in a 17 percent increase in revenues in the first year after its release.
UPS
United Parcel Service (UPS) is the world’s largest package delivery company, delivering more than 19 million packages per day to over 8 million customers in more than 220 countries and territories around the world. However, customers were often frustrated to receive notices or emails to the effect that their packages would be delivered on a certain day between 8 a.m. and 6 p.m., as remaining at home for such a long window considerably inconvenienced most people.
In response to customer complaints, UPS began tracking each vehicle via GPS, not only to improve route optimizations (resulting in over 8 million gallons of fuel savings per year), but also to more accurately predict delivery windows, dramatically cutting these down to one- to two-hour slots. UPS also began enabling customers to monitor these reduced delivery windows via its mobile app. Customers now can elect to receive alerts when their delivery is imminent and can even provide the driver instructions directly from the app. These improvements in customers service via digital technologies have resulted in a dramatic increase in customer satisfaction and loyalty for UPS.
Transforming the Employee Experience
It’s not only improved customer experiences that have a bottom-line impact on a business, but also improving the experience of their employees. Some of the challenges facing today’s workforce include the following:
Information overload: Information is still growing at exponential rates and employees can’t find what they need, even with technology advances.
The need for speed: With the rapid pace of today’s work environment, employees increasingly need to work faster and collaborate more effectively to get their jobs done.
An aging workforce: As baby boomers continue to retire, they are taking key knowledge with them, increasing the need to digitally capture their knowledge.
However, meeting these challenges with digital technologies can significantly improve the employee experience, as reported in a study by Deloitte8 that showed increases in the following areas:
Employee productivity: Organizations with strong online social networks are 7 percent more productive than those without.
Employee Satisfaction: Organizations that installed social media tools internally found a median 20 percent increase in employee satisfaction.
Talent Attraction: 64 percent of employees would opt for a lower-paying job if they could work away from the office.
Employee Retention: When employee engagement increases, there is a corresponding increase in employee retention by up to 87 percent.
Some specific examples of companies that have harnessed digital technologies to improve employee experiences are overviewed next.
Air France
Prior to 2006, each Air France pilot, aircraft, and flight route required a unique set of on-board documentation that collectively added 60 pounds of paper to each flight. Furthermore, critical decisions relating to safety and operations were delayed in the paper-based communications process, including the delays required to type and photocopy all the relevant information, as well as the delays in mailing these instructions and updates to each of the over 4000 pilots and 15,000 flight attendants within the organization. The collective daily operational information filled entire dedicated rooms at multiple airports that Air France serviced. To cope, Air France made the key decision to digitize all such communications. By 2013, all of the necessary information was delivered to pilots via an iPad app, dubbed Pilot Pad, as shown in Figure 1-8. Now, not only do pilots have far less to carry (as do the aircrafts, resulting in considerable fuel savings), but also whenever Air France updates a document in its library, 60 percent of affected pilots review the updates within 24 hours, thus increasing the safety and efficiency of the airline’s operations.
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Figure 1-8 Air France Pilot Pad
Additionally, pilots benefit by being able to take training via e-learning modules on their iPads, rather than trying to coordinate in-classroom training sessions, which traditionally has been very challenging, considering their extraordinary travel schedules. Also, the app allows pilots to complete non-flying duties whenever and wherever they want, making productive use of their time spent waiting in airports. The overall effect for Air France is the evolution of its flight operations into an efficient and user-friendly process, which has proved so popular with the pilots that Air France has subsequently rolled out a similar iPad-based solution for its in-flight cabin crews.
Other airlines have followed suit, such as Alaska Airlines, which estimates that its iPad-based system saves the company over 2.4 million pieces of paper overall and 25 pounds of paper per flight (which is critical in some of the remote locations serviced by the airline).
RehabCare
The 18,000 employees of RehabCare provide rehab and post-acute care services, in over 1200 hospitals and facilities across 43 states. In such an environment every minute counts and employees need to track and record every detail, including the diagnosis, treatment, and when the appointment began and ended. To meet these challenges, RehabCare equipped its staff with easy-to-use, process-driven applications on iPhone and iPad mobile devices to provide point-of-care information capture quickly and easily. Additionally, their cloud-based applications allow access to detailed patient information anytime, anywhere. RehabCare estimates it is saving millions per year, while enabling its employees to quickly capture and/or consult critical data in an intuitive manner. Benefits also extend to the patients, as the app significantly reduces patient pre-admission screening times.
Cisco
Cisco itself has been recognized for leading digital innovation in the workplace of its 70,000 employees worldwide. As a large and global organization, Cisco noticed the trends in collaboration and the need for an integrated workforce experience, and as such implemented various solutions to this effect. For example, it launched a Cisco video communication and collaboration platform to communicate more effectively, as well as enterprise social software to facilitate healthy collaboration with personalization and relevance. These programs include a connected workspace, wiki, and video blogs, expertise locator, and sales productivity, remote collaboration, and telecommuting applications.
As shown in Figure 1-9, these platforms connect to each other for an integrated and user-friendly experience. With the implementation of seven distinct collaboration programs, Cisco recorded a total of $1.052B in net benefits from collaboration solutions.
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Figure 1-9 Cisco Collaboration Tools
Transforming Business Operations
While digital technologies can increase revenue by delivering new customer experiences and/or increasing employee productivity increases, profitability can also be increased by leveraging digitalization to streamline and economize business operations, as the following examples demonstrate.
Boeing
There are more than 6 million parts that make up a Boeing 747 aircraft, which all have to come together at precisely the right times in order to complete production. Furthermore, since these aircraft are assembled in the largest building in the world, namely Boeing’s Everett Factory as shown in Figure 1-10, there’s a lot of ground to cover when something goes missing. The bottom-line impact to Boeing of a misplaced or lost part, toolkit, machinery, or work-in-progress (WIP) inventory is greater than $1 million per incident. To reduce such losses, Boeing implemented RFID tracking along with Cisco wireless infrastructure location capabilities to instantly identify where any key part, tool, or WIP inventory is at any given time. This digital parts-tracking system reduced production delays, inventory expenses, and even government fines.
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Figure 1-10 RFID-Enabled Boeing 747 Assembly Line in Everett, Washington
Codelco
Codelco, a Chilean state-owned mining company, is the world’s largest producer of copper. Mining not only is dark, dirty, and labor-intensive process, but is also very dangerous, as was amply demonstrated by the events that captured the world’s attention that unfolded in a (different company’s) Chilean mine in 2010, where 33 workers were trapped underground for 68 days.
To make mining operations safer, Codelco equipped its immense mining trucks, shown in Figure 1-11, with digital technologies that allow them to drive autonomously, arriving at their destinations just-in-time and with fewer accidents than those with human drivers. Codelco then expanded the application of similar technologies to other mining equipment, making these autonomous as well. Now, many of Codelco’s workers don’t head down to the mine to work, but rather to the control center in the city. Mining via autonomous equipment not only improves safety, but also brings additional economic benefits to Codelco. For example, removing humans from underground mines allows Codelco to design them to different specifications, allowing Codelco to dig with less cost and with lower risk, thus opening up the possibility of exploiting ore caches that may not have been economically feasible otherwise.
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Figure 1-11 Codelco Autonomous Mining Trucks
BC Hydro
BC Hydro is a Canadian electric utility in the province of British Columbia, and is the main electric distributor serving nearly 2 million customers. BC Hydro has installed 1.93 million smart meters since 2011 and more than 99 percent of customers now have a new meter.
Since the installation of these smart meters, BC Hydro has realized over $100 million in benefits, primarily from operational savings. Customers also benefit, as these meters have made their bills more accurate, due to reduced manual meter reads and bill estimates. Customers can also now view their hourly and daily energy use through their online account, providing them new tools to save energy and money. Furthermore, such new metering technology has laid the foundation for more widespread use of small-scale, green, distributed electricity generation including solar and wind power.