Citi Ventures Leader: Not All Transformations are Digital

March 11, 2019

As software continues to “eat the world” and large organizations work to keep pace with technological change, there can be a tendency to assume that all transformations are now digital transformations.

Beth Devin, Head of Innovation Network & Emerging Technology, Citi Ventures

But that is not entirely true. While leveraging technology can help companies improve and modernize their processes, products, and services, true transformation is often predicated on deeper shifts in the organization. In fact, the most successful digital transformations often arise organically from a new vision or company culture, rather than vice versa.

I’ve compiled below several examples of major organizations that are regaining their momentum in hyper-competitive markets by rethinking their core focus, strategy, and structure in order to enable enterprise-wide transformation.

Companies that Made the Leap

    1. In the early 2000s, Microsoft‘s shares were languishing around $20-30. The company seemed stuck in the past, and struggled to compete with other tech giants such as Apple and Google. In 2015, Microsoft took a huge step and reoriented its strategy. It shifted from concentrating primarily on high margins to focusing on growth. Under the leadership of CEO Satya Nadella, Microsoft rediscovered its roots as a fierce competitor and transformed itself into a growth company with the capabilities and attitudes necessary to compete in modern markets.Nadella shifted the company from what he dubbed “a ‘know-it-all culture’ to a ‘learn-it-all culture.'” Learn-it-all cultures, he explains, will win every time. Nadella also deprioritized Windows, and refocused Microsoft’s leadership and business strategy on cloud services, artificial intelligence, and gaming. Microsoft has also acquired 49 companies since 2014, including LinkedIn and the software development platform GitHub. Today, Microsoft trades at over $100 per share.
    2. As one of the first successful automobile manufacturers, it would have been easy for Ford Motor Company to stay within its comfort zone. After nearly filing for bankruptcy in 2009, however, Ford realized that it needed to rethink its approach.In 2017, Ford brought on Jim Hackett, formerly CEO of the furniture-maker Steelcase, as its new leader. Hackett has implemented design thinking principles across the company to ensure that Ford is truly delighting its customers, and is now spearheading an $11 billion, multiyear corporate restructuring that will transform it from a 20th century automaker into a 21st century transportation services provider. As ride-sharing and autonomous vehicles point the way toward Mobility-as-a-Service (MaaS)—an industry which is expected to grow to $1.75 trillion in 2028—Ford is cutting product lines and working to develop an ecosystem of mobility solutions and providers. While that effort has had its fits and starts, Ford is on the path to reshaping itself and once again emerging as a global transportation leader.
    3. Procter & Gamble was founded in 1837, but its longevity offers scant protection against intense competition in the globalized market for consumer goods. In 2014, P&G began to streamline and simplify the company, reducing its brand portfolio from 170 to 65 and building out its e-commerce business with companies such as Amazon, Alibaba, and Tencent. P&G also dismantled its matrix organization and replaced it with a simpler structure, resulting in speedier decision-making and greater end-to-end accountability. The results of P&G’s transformation are consistently better top-line and bottom-line numbers, including dramatically improved core operating margins. Its stock price has climbed steadily, reaching historic highs in 2018.
    4. Walmart recently partnered with Microsoft and Google to provide shoppers with the kinds of convenient digital experiences they’ve come to expect from e-commerce retailers such as Amazon and Alibaba. At a June 2018 shareholder meeting, CEO Doug McMillon described Walmart as a “technology company.” Unquestionably, Walmart has seen the writing on the wall and is repositioning itself as customer-focused and digitally adept. Walmart’s use of Microsoft Azure for cloud services and Google Home for voice-activated shopping demonstrates its commitment to catching up with its tech-savvy competitors. Walmart also invested heavily in acquiring reputable firms with proven e-commerce platforms, such as (a Citi Ventures portfolio company), Bonobos, and Flipkart, India’s largest online store.Walmart’s transformation isn’t just about enhanced digital customer experiences—it’s also about increasing the company’s scale, reach, and scope of services. Clearly, Walmart intends to remain competitive, and is investing in the resources it needs to maintain its role as the world’s leading retailer.
    5. For years, SAP has been a leading provider of software and expertise for industrial-strength business transformations. Now, the firm is transforming itself to become leaner and less complicated, making its formidable suite of products and services easier to understand and less cumbersome to deploy. SAP’s transformation is driven by business logic and by the changing nature of the software industry. The open-source revolution has forced companies such as SAP to re-evaluate their reliance on proprietary enterprise software, and to offer products that can be mastered by typical business users. Essentially, SAP is in the process of transforming itself from a company that sells software into a company that provides business results. In that regard, SAP is following the larger global trend of focusing less on product capabilities and more on experiences the customer wants.

Key Transformation Drivers

The examples above demonstrate that successful corporate transformations, while often enabled by technology, rarely succeed solely due to technology. Rather, these shifts often center on one or more of the following drivers:

  • People – To develop and execute full-scale transformation, an organization must have the right talent, skill, and experience in place. Encouraging your people to adopt and continually reinforce a growth mindset can empower them to take chances and invest in developing new capabilities. The tone from the top and the echo from the bottom are both important indicators to monitor.
  • Focus – As industries evolve into ecosystems, companies have the opportunity to reconsider their ultimate aim, purpose, and approach. Some of the most fascinating transitions involve shifting a company’s strategic focus from selling products to providing optimal customer experiences and services.
  • Fortitude – Strategic change is a complex and resource-intensive process. Retooling the organization, processes, and reward systems can help companies maintain the patience and discipline required to push through blockers as well as celebrate wins along the way.
  • Horizon – Organizational renovations are not “one-off” projects. They are multi-year ventures with deep and far-reaching consequences for stakeholders at every level of the enterprise. Fixating on short-term results can erode long-term efforts, which often involve months or years of testing, refinement, and optimization.
  • Openness – Successful transformations require high levels of self-analysis and candor. Bringing transparency to your leadership team can help sustain an enterprise-wide transformation strategy.

In Conclusion…

Ford’s CFO, Bob Shanks, is straightforward when he talks about the company’s ongoing restructuring: “This type of profound redesign will take time,” he said last year.

But that is true of all corporate transformations: there are no overnight successes, and there will likely be moments of failure and despair. Successful organizations will be those that keep their client at the center of every decision they make, and find the strength to persevere in the face of obstacles and thrive in our dynamic economy.