The Future of Digital Transformation Uncovered
Insulin, parachutes, contact lenses, even the everyday match - these are but a few examples of inventions and innovations to come out of Europe. Fuelled by the continent’s creativity, open-mindedness and an international approach, Europe has always emerged as a leader in new business. And it’s from this spirit and mindset that I’ve created Henkel X - a platform that brings together the smartest network and industry partners to participate in open collaboration and where the inspirational get inspired. Henkel, itself was founded 142 years ago by Fritz Henkel, himself a proud entrepreneur. Today, we have a turnover of around 20 billion euros and more than 50,000 employees in over 100 countries. And Henkel employees remain entrepreneurially minded. My focus is very strong on Europe because I believe that it holds fantastic opportunities, and I take inspiration from Europe’s entrepreneurial history. We see many family owned businesses that have been built by entrepreneurs. Therefore, an agile mindset is inherent.
Take one look at our current high streets and it is clear that entrepreneurism and business are rapidly changing. In the last two decades alone, the way we shop for goods has been entirely reinvented. Amazon, eBay, Alibaba, and other e-commerce giants, now account for trillions of dollars in market capital, and these companies didn’t or barely existed just 20 years ago. We’ve also seen a burst in the number of services now available online, from transportation to food delivery, clothing to aesthetic services.
The evolution of these service marketplaces has been Darwinian. The 1990s were dominated by listings - horizontal marketplaces with little to no regulation: the yellow pages in digital form. These new verticals - the likes of Craig’s list - helped democratise access to products and services, but they also placed the onus on the user to quality control the provider and to contact the business and facilitate all facets of the transaction.
In the 2000s this proposition was slightly refined. Instead of the jumble of brands, services, and business types presented in the Craigslist model, specialised marketplaces and platforms began to emerge. There was also a proliferation of value-add thanks to clever new software allowing users to filter the information into categories, such as geographic location and user ratings.
Over the next decade the model pivoted yet again and the impulse towards on-demand market-places grew. As mobile phones became more sophisticated, so did the market's dependence on them. Now, with the tap of a button, users could book a service and businesses could accept the job. Following on from this, according to a new report from Accenture, internet data volume in the United States alone has increased by 238 percent in the past two years and by 2021, video will account for 76 percent of all mobile data traffic.
But the most notable difference in this next generation of marketplaces is that customers now place their trust in the platform itself. These sophisticated new marketplaces are highly managed and, in some cases, dictate the price of the service itself and command a higher rate than their less-established counterparts.
In broader terms, what this means is that now the technology-grown businesses and their teams are interacting with the customers themselves. And as a result, the entire definition of advertising and marketing has been disrupted. Marketing used to be advertising, period. But now it is all encompassing. It is everything that a business does, says and stands for.
These fundamental shifts in our world mean it takes a new way of thinking and conducting business to achieve success. Companies must build their offerings around consumer demand and leverage new technologies that enable current boundaries to be broken. We need to embrace partnerships and innovation to come out on top. Ecosystem, Experience, and Experimentation are the three pillars of Henkel X that we use to help us grow and prosper.
Henkel’s Ecosystem includes our like-minded partners and collaborators, such as the mentors in our Mentorship Club and companies like Founders Forum, the private network of leading digital entrepreneurs, corporate executives, and investors. The second is Experience, whereby our interactive events foster collaboration and innovation. Our monthly Show & Tell events have featured more than 21 start-ups and included to date 12,000 Henkel participants (in aggregate); equally, our Fireside Chats bring together industry experts for moderated roundtable discussions on digitally relevant topics. And finally, in order to transform, you need to Experiment. Henkel has a venture fund that invests directly and indirectly in startups. Our aim is to spend around 150 million euros on Henkel's startup support program by 2020. We work alongside companies that we are proud to now count as partners. This includes H-Farm, Europe’s leading innovation platform with a network of over 4.5 million active startups and 13 years of experience, as well as a growing list in our industry partnership network.
Disruption is an opportunity. In order to seize it, a company must not simply inject digital thinking into the business, but instead use digital to transform the very DNA of the company itself. Don’t assume you can make a tectonic technological shift while maintaining the rest of the business model. That’s simply the wrong approach, which is precisely what a recent study from McKinsey found. In practice, fewer than one third of digital transformation efforts succeed. The only way to regenerate a business is to collaborate across varied marketplaces and engage your company’s entire workforce in the revolution. Companies that empower their staff, particularly middle management, to be key players in the change produce more agile and responsive businesses as a result.
What I’ve learned is that everything starts with the team. To run and grow a highly skilled, top-performing company you must ensure the right people are placed in roles that allow them to thrive. Secondly, create an atmosphere of collaboration - this is something fundamental to my role at Henkel, vis-a-vis Henkel X and our Mentorship Club. Equally, when you have team members working side-by-side on cross-functional teams, they can support and encourage each other. I lead my teams to believe nothing is impossible, to encourage free-thinking and be collegial with one another at all times. Thirdly, always use the information and data available to you. As we continue to grow into a culture of continuous measurement, use this qualitative and quantitative data to prepare and inform your work.
It should now be apparent that the role of a CDO is both strategic and operational. Yet it’s still a relatively new role in many organisations - at Henkel, for example, this chief digital officer role was created in 2017. In my view, when leading a digital transformation, a job with this description should have a finite lifespan. While it may be counter intuitive, doing my job well should in time make my job title obsolete. That doesn’t mean that one needs to leave the organisation, but one can move into a different role within. Because our goal should be to stop thinking about technology in such siloed terms and not to fixate on concepts like “social media” and “connected clouds”, but to change a company from the inside out. This is about cultural change, innovation, new business models, and building marketplaces. It’s about continued business growth, replete with new challenges, and complexities. It’s about business that is enabled by technology and intuitive to customer need and demand - not the other way around. I draw some inspiration from what I learned throughout the mid-90s in the media industry, for example. Especially those lessons that challenge a marketplace the most. I’ve watched how an entire industry can topple when those leading it are complacent or arrogant, instead of curious, open-minded, experimental, and collaborative. It’s about the principles of build, measure, and learn, as well as investing in partnerships to extend your relevance. These are uncharted times and leading a digital transformation and its teams, who ultimately drive this agenda, is about far more than IT, it’s about taking the entire business into the future.
About the Author
Dr. Rahmyn Kress is Chief Digital Officer and Chairman of the Digital Executive Committee at Henkel