Editorial
The buzz that surrounded Unilever’s $1 billion buy of the Dollar Shave Club was telling.
In many ways the purchase symbolizes the inability of large companies to respond quickly to new sales models and consumer behavior. Online businesses like the Dollar Shave Club, Uber, TripAdvisor, Airbnb and Netflix are disrupting industries and threatening any brand based on traditional business models.
The acquisition and other similar partnerships this year offer a window into how some CEOs are accelerating digital transformation within their companies.
Traditional Business Models Weighed Down By Legacy Systems
A recent study by Radius Global Market Research revealed that when it comes to personalization, marketers only hit the mark about 30 percent of the time. Companies must go beyond automating back-end processes. They need to deliver a relevant and convenient buying and servicing experience for their customers.
Weighed down by legacy systems, companies struggle to meet the many demands of the current market. Many organizations approach digital not as a strategy, but as a project or a campaign.
Being digital is more than a campaign with a bunch of projects. It requires an entirely different operating mode, not just another restructuring of the organization. It requires new talents and tools. It requires fast fails and an agile mindset.
While Digital Natives Speed Forward
While some companies struggle to transform, the digital natives are growing up and influencing the marketplace.
The rate of technology adoption is staggering. Companies simply do not have time to evolve into a digital state.
Certainly, as evidenced by a recent Dell study, organizations are making headway. Dell’s State of IT Trends 2016, found that business decision makers’ and IT decision makers’ understanding of current IT trends are becoming aligned. This is critical. Culturally, having alignment within leadership is a requirement to drive change throughout the organization.
2016’s mergers and acquisitions give us insight on the importance of accelerating digital transformation. If a company needs more reasons to accelerate change, it needs look no further than the headline news.
Reading the Tea Leaves in Industry News
The news tells us:
The internet of things will impact all industries
From candy makers to insurance companies, connected devices are a driver pushing change in corporate America. According to the Accenture report, “Digital Insurance: Reimagining Insurance Distribution,” nearly half (45 percent) of insurers think that within the next three years, connected devices will be critical to their revenue growth.
One way businesses are building connections is through strategic partnerships.
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Last month Samsung and Nestlé announced a partnership. President and Chief Strategy Officer of Samsung Electronics, Young Sohn characterized the collaboration this way: “Today, we live in an era of smarter living brought about by the convergence of technology and life science. It’s an era where the data from smart sensors and devices in our daily life, such as mobile phones, wearables and smart refrigerators, can help us to understand our nutrition and activity and to guide us towards a healthier lifestyle.”
Business transformation is critical to developing lasting customer relationships
A few months ago, Trevor Edwards, president for NIKE Brand, announced the company’s new chief digital officer (CDO). In his remarks, Edwards stressed that, "today’s announcement is a continuation of the Nike promise to develop deep and lasting relationships with consumers — to offer the best athletic service, period.”
PWC reported that the majority of CDOs have been hired within the past few years.
Is appointing a CDO the answer to driving digital change?
Someone in the C-suite needs to be responsible for driving change, or it will not happen. Appointing a CDO and expecting results without CEO involvement is wishful thinking on the part of the CEO. Without direct CEO involvement, a CDO cannot breakdown the internal political barriers and siloed organizations.
Nike understands that the company is not just selling athletic wear. Marketers are now selling to the “experiential consumer.”
Consumers are buying a product experience or lifestyle, not just a gym shoe or pair of yoga pants.
Yes, we are talking about sneakers and football jerseys, but you can say the same about a car, dinner or furniture purchase. And banking clients are even more sophisticated and demanding. Creating a relationship with consumers requires a personal touch. In our global and time-starved world, digital is the best way to deliver a relevant, personal experience.
Markets are changing so fast, even tech companies are buying tech companies
Microsoft purchased LinkedIn. Why? Microsoft knows that it takes serious development time that it doesn’t have to create the digital capabilities it needs.
The same goes for Amazon, Cisco, Ericsson and Verizon. All four companies recently got into a bidding war over Elemental Technologies, which creates high-speed video-delivery systems. Twitter purchased Periscope, a live broadcasting company in an attempt to revive growth.
Tech companies buying tech companies is nothing new, but the recent purchases reflect a growing recognition that it takes more than a chief digital officer to deliver what today’s consumers demand.
The Wall Street Journal reported that last year set a record for mergers and acquisitions. They give technology partial credit for driving the deal values sky high. It is not only because digital is driving dramatic changes in behavior. It is also a new means of generating incremental revenue.
If You Can't Beat Them, Buy Them
Successful CEOs will follow the lead of their industry peers in the news. They will leverage acquisitions, partnerships and joint ventures. The C-suite’s best defense against the disrupters is to either beat them at their own game or join with them.
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