GDI: Why do many companies have difficulties in using digitisation to their advantage?
Jan Sedlacek: “Digitisation” is an enormously wide-ranging phenomenon: core issue is the accelerating technisation of all areas of the business world and even of society as a whole, and this is taking many forms. That's why digitalization is so difficult for managers to grasp. The obvious solutions – such as process automation, digital user journeys, business intelligence, etc. – inevitably do not go far enough. They are absolutely necessary, but they are no longer sufficient to gain a competitive advantage. This requires a very deep understanding and a good sense of all aspects of this phenomenon in the field of management on one hand and pronounced organisational skills, such as a high degree of decentralised decision-making power and a willingness to experiment on the other. This is still very difficult for many companies, they are basically standing in their own way.
How can you create awareness of digitalisation in a company’s management consisting to 100 per cent of non-digital natives?
If you are serious about digitisation, I believe you can only do that by placing “digital minds” in charge of management. It is not enough to keep digital minds in staff roles or in the depth of the organisation, where they can do nothing else but perform the theatre of digitalisation. However, you don't have to be a “digital native” to have a “digital mind”: The key issue for me is always whether someone is really driven by data and facts, in particular whether he really allows himself to be driven by user and customer feedback. There is also the question of whether he likes to experiment with new technological solutions and is also prepared to accept failures as a natural outgrowth. So it's about mentality and not not someone’s skills or how old he or she is. From time to time I also meet experienced managers to whom I give the attribute “digital mind” to 100 per cent. It is not just about a specific skill that can be acquired or supplemented by an additional board member, but about a specific way of thinking that is unfortunately not yet standard in many boardrooms.
That's why I see the popular nominations of Chief Digital Officers, Silicon Valley safaris and design thinking workshops as an awareness raising tool very critical: This is as if you as a Swiss or German executive wanted to make your company “more Chinese” by organising a two-week tour through China and a Qi Gong workshop and then get a Chinese into business development.
What is still missing in the retail industry today in order to be successful in the “New Age of Retail”?
It's the customer, stupid! What is really needed is “obsessive customer orientation”, as Jeff Bezos called it. Unfortunately, I don't see that with many retailers, and this is absolutely essential. By this I mean that not only in management but in every part of the organisation you really have to ask yourself constantly how you can create additional value for your customers. Furthermore, you have to be able to experiment directly with your customers instead of launching your ideas for a lot of money, e.g. as a new product line. In other words, the corporate culture is very important, and a certain empathy must be anchored in it. I think the first challenge here is the awareness of the top management: I have never met an executive who did not consider himself “customer-oriented”. But if this executive spends most of his or her time increasing frequencies and sales, optimising the supply chain, prices, channels and product ranges, then he or she is not customer-oriented.
What impact does digitisation have on the job profile of potential employees and managers in the retail industry?
And here, too: I believe it is less about the right job profile than about the right ideas, primarily about this intuitive customer orientation in combination with the willingness to experiment. You could say a kind of “empathic curiosity”. For managers, there is an additional necessity to understand the interrelationships in the networked world, otherwise you end up in the dead end of “silo-optimisation”, where in the end no channel and no product matches the other and consequently the user experience suffers.
Thanks to the Internet, customers who are well informed about their preferred product are a big challenge for the retail industry. What strategies can stationary retailers use to satisfy spoiled customers?
Customers are not spoiled, they are “accustomed” to the fact that prices are falling and at the same time service on the Internet is getting better and better. Therefore, it is only natural that customers now also demand the service level accustomed to on the Internet on a stationary basis. If the customer already knows what his desired product is because he has already satisfied the need for advice online, then the result is unfortunately that even as a stationary retailer you have to keep up with the Internet in terms of both price and availability. Strategies for cost reduction, process optimisation, web shops, etc. could now be derived from this, but this would at best catch up with online competitors. This means that such strategies save a maximum of time and distract customers from the actual problem of shrinking value creation in the stationary retail sector. I think, if you have the self-conception to be a stationary dealer, then you are already doomed. In this way, you explicitly put the channel before the customer's needs.
So here again, it means dealing intensively and constantly with the question of what role you can actually play in customers' lives – and not just hypothetically in some strategy workshop, but objectively based on a deep, data-based understanding of the customers' needs.
If you conclude that your value creation actually still lies primarily in satisfying transactional needs, then nowadays you have to believe in particular that you are able to perform more efficiently and better on the last mile to the customer's home and/or shop than for example Amazon or Zalando.
Otherwise, there is only one consistent verticalisation strategy: to achieve this, you must mercilessly engage in creating value for specific customer groups, i.e. satisfy certain use cases for particular product and service categories much better than the large online merchants. This can only be achieved if the “end-to-end” approach is adopted, i.e. from the final customer to production. If you start to think like that, I guess you're on the right track.
Jan Sedlacek was a speaker at the 68th International Retail Summit on 6 September 2018 at the GDI.