Welcome to the era of “Transform or be transformed.” Across industries, advances in everything from analytics and artificial intelligence to mobility and social media are changing virtually every aspect of doing business. This new reality—like most large-scale changes—represents both an opportunity and a threat for business leaders, agreed CEOs gathered for Chief Executive’s recent CEO2CEO Summit.
“We know that the pace of digital transformation is accelerating and that it will impact every industry,” said Marc Singer, senior partner at McKinsey & Co., who pointed to statistics suggesting that 75 percent of companies currently in the S&P 500 will be gone by 2027. “It’s a question of what the nature of that digital impact will be and how to respond. The transition to a more digitally [savvy] model is critical to survival.”
Recognizing this imperative, business leaders participating in the summit shared their experiences deploying digital strategies to engage more effectively with consumers, streamline internal processes, improve productivity and explore new value propositions. Following are some key themes that emerged.
1. STAYING CURRENT REQUIRES CONSTANT VIGILANCE. The rapid growth of relative newcomers like Amazon, Uber and Netflix epitomizes the threat of disruption faced by legacy businesses that fail to foresee and adapt to game-changing technology. The consequences of neglecting to adapt to even incremental advances, however, can be just as dire over time, marching a healthy business steadily toward obsolescence.
The good news? Recognizing the need for constant vigilance or, as Singer put it, “feeling the hot breath of the Amazon wolf on my neck” is a great motivator. He noted that Amazon’s success has galvanized retailers like Nordstrom, which, over the past few years, has put $1.5 billion in technology capital investments toward developing an “omnichannel” that will provide customers with a seamless offline and online shopping experience, in part by giving its sales team a 360-degree awareness of inventory in the system. “If you can’t find an item in your size at a store, the sales team can locate it for you wherever it might be,” Singer explained. “It reduces lost sales and markdowns and improves the customer experience.”
Even companies that once innovated their way to success become vulnerable to the next big thing once they reach a certain size. 1-800-Flowers—which revolutionized the floral business by embracing telephone sales and, later, e-commerce—guards against that by aggressively pursuing new technologies as soon as they emerge, reported Jim McCann, the company’s founder and executive chairman.
The company was an early partner with IBM Watson, which led to the creation of a digital concierge. “Gwyn” is a virtual assistant that helps web customers with their gifting needs and will, thanks to machine learning, learn its craft much the way a floral shop employee learns about floral service over time. 1-800-Flowers is also partnering with Uber to speed delivery service, has a chatbot on Amazon Messenger and a partnership with Amazon’s virtual assistant, Alexa, that allows customers to place an order with a voice command.
2. DIGITAL ADVANCES HAVE RAISED CUSTOMER EXPECTATIONS ACROSS ALL INDUSTRIES. Customers in both the B2C and B2B segments increasingly expect instant gratification—and stockholders are no different, noted Dow Chemical CEO Andrew Liveris, who is leading a reorganization aimed in large part at making the company more agile. When the dust settles, Dow will be divided into three entities: one devoted to materials sciences in the packaging, infrastructure solutions and transportation areas; a second concentrating on agricultural science; and a third focused on specialty petrochemicals.
“The diversified conglomerate model is dying in the public market,” Liveris said, explaining the thinking behind the reorganization. “You have to choose areas of [focus] so that you can scale appropriately within them.”