The rise of new digital technologies is one of the most exhilarating challenges facing companies today. No sector or organization is immune from the digital phenomenon, which dictates its own pace and presence in the management agenda. The question is no longer when companies need to make digital a strategic priority – this tipping point is past – but how to embrace it and turn it to competitive advantage.

1. N° 01 JULY 2011
The challenges of the digital revolution
• L’Oreal’s choices by Marc Menesguen • Transform to the Power of Digital: Digital
Transformation as a Driver of Corporate Performance by Capgemini Consulting • No sector
is immune by Andrew McAfee, MIT • The boom of Chinese e-commerce by Brian Xin,
StarryMedia • A transformed society is emerging by philosopher Bernard Stiegler

2. summary
eDitorial vision guest writer
Digital and Transformation: No sector is immune from digital Digital as Bearer of Another
Are they now indivisible? transformation Society
By Capgemini Consulting’s Interview with Andrew McAfee, By Bernard Stiegler, philosopher,
Editorial Board principal research scientist at the President of Ars Industrialis,
page 4 Center for Digital Business, MIT Director of the Pompidou Center
Sloan School of Management Institute for Research and
page 30 Innovation
page 43
strategy
Beauty and digital: A magical
match Capgemini Consulting’s
Interview with Marc Menesguen, Editorial Board:
Managing Director of Strategic telesCope Pierre-Yves Cros, CEO
Marketing for L’Oréal Tom Blacksell, UK Regional Head
Chinese entrepreneurs take full Didier Bonnet, Global Head of
page 6 Practices
advantage of the e-commerce
Patrick Ferraris, Global Leader,
boom Technology Transformation
Interview with Brian Xin, founder Xavier Hochet, France Regional Head
of StarryMedia, a Chinese start-up Ton de Jong, Netherlands Regional Head
for social marketing and digital Eric Roudil, North South Europe
Close-up research Regional Head
page 36 Michael Schulte, Germany Regional
Head
Transform to the Power of Digital: Ken Toombs, USA Regional Head
Digital Transformation as a Driver
of Corporate Performance Coordination Editor:
Claire Thiebaut
By Didier Bonnet, Global Head of
Practices, Capgemini Consulting Design and Production:
and Patrick Ferraris, Global Leader, Les Ateliers Corporate
Technology Transformation, Key figures
Printing:Solutioncom
Capgemini Consulting
page 14 pages 35 and 42 Cover illustration:
Fernando Togni
Digital transformation review n°01 - 03

3. eDitorial
Digital and Transformation:
Are they now indivisible?
By Capgemini Consulting’s Editorial Board
W elcome to the first issue of Capgemini
Consulting’s Digital Transformation
Review. The rise of new digital technologies
the opportunities offered by these new tech-
nologies and their related applications. While
transformation is not just digital, transforma-
is one of the most exhilarating challenges fa- tion cannot do without digital.
cing companies today. No sector or organiza-
tion is immune from the digital phenomenon, Second, digital is shaping the competitive
which dictates its own pace and presence in battleground in all sectors. The data shows a
the management agenda. The question is no growing performance gap between the best di-
longer when companies need to make digital gital learners and the others. The more a sec-
a strategic priority – this tipping point is past tor relies on technology, the greater the gap
– but how to embrace it and turn it to compe- between the most effective companies and the
titive advantage. rest. And yet, the digital phenomenon doesn’t
stop at the borders of «traditional» sectors. Di-
Given this urgency, should we now view the gital technology allows a more targeted busi-
rise of digital as the alpha and omega of trans- ness approach, more scientific decision-ma-
formation strategies, the focal point for every king and a new type of customer relationship.
aspect of corporate change? Our hypothesis is Companies in every business sector need to
that transformation strategy is its own master, master digital tools.
but we have reached a stage where transfor-
mation cannot be done in isolation from digi- We do think it is important to stress that this
tal. There are two reasons for this. emphasis on a technology-driven digital re-
volution in no way diminishes the importance
First, digital has a fundamental impact on how of human initiative and responsibility. Indeed,
change takes place. Moving forward, every the truth is quite the opposite. It is more im-
strategy that is devised must take account of portant than ever to acquire the right skills
Digital transformation review n°01 - 04

4. eDitorial
and place them strategically to support trans- Media, a Chinese start-up connecting marke-
formation programs. ting and social media, offers particular insight
into the speed of change in China today.
In this publication we are determined to em-
brace just this sort of complexity and coun- Finally, philosopher Bernard Stiegler provides
ter-intuition, through a viewpoint that cros- the necessary distance for understanding the
ses geographical boundaries and domain social impact of the digital revolution, which
boundaries, with contributions from faculty he compares in the scale of human history to
experts, practitioners, start-up pioneers and the invention of writing.
philosophers:
Marc Menesguen, Managing Director of Stra- We hope you enjoy the thoughts and strong
tegic Marketing for L’Oréal, explains how the convictions of all our authors.
digital revolution has impacted the organiza-
tion and strategy of this global beauty pro-
ducts leader.
Prof. Andrew McAfee of MIT paints a picture
of how these digital technologies are disrup-
ting work processes and corporate strategy.
Along the way he describes profound changes
in American consumer habits and their im-
pact on traditional marketing approaches.
The article by Brian Xin, founder of Starry-
Digital transformation review n°01 - 05

5. strategy
Beauty and digital: A magical match
an impact on how our consu-
Marc Menesguen, Managing Director of mers relate to information and
Strategic Marketing for L’Oréal, explains advertising, and thus to our
brands. According to a study by
how the digital revolution has impacted the Forrester group, 7% of sales
around the world today take
the organization and strategy of the place online, and almost 40%
global beauty products leader. of off-line sales are influenced
by internet research. So almost
half of purchases in the world
are already somehow digitally
H as the rise of the digital
phenomenon changed
your customers’ habits?
influenced.
This trend in any given country
depends on its digital maturity.
Digital transformation is one In the United States, where the
of the major drivers of change phenomenon first developed,
in today’s world. I believe we the internet plays a very signi-
are witnessing the start of a true ficant role today in purchasing
revolution, given how the major decisions and in how we sup-
players are powering forward – port our consumers. This is a
Google, Apple, Microsoft, Face- little less the case in Europe,
book... – and the speed at which although things are advancing
digital tools are proliferating. more quickly. And in the newer
There are expected to be 20 markets digital technology has
billion connected devices (tele- a considerable impact. In China,
phones, tablets, game consoles, internet penetration is already
etc.) by 2015. almost 30%. These changes are
of fundamental importance to
This revolution naturally has L’Oréal.
Digital transformation review n°01 - 06

6. strategy
How does the company view you see emerging with digital The final opportunity involves
this revolution? transformation? innovation. Research & Innova-
tion is at the heart of the L’Oréal
Digital transformation re- First of all, digital transforma- model, and digital transforma-
presents an extraordinary tion is a chance to strengthen tion helps our researchers’ work.
opportunity to strengthen our our brands’ images by impro- For example, in the United Sta-
current business model and be- ving the efficiency of our com- tes we have a social network
come even better at being the munication and advertising. of 250 women who test our
world’s number-one beauty cosmetic or facial care products,
group. In fact, beauty and di- and give their feedback online.
gital are something of a magi- “ The digital world We examine their reactions
cal match, because beauty is an and take them into account
multiplies the ways
emotion and the digital world when designing new products.
our brands can create
multiplies the ways our brands We have truly reached the stage
can create an emotional-filled
an emotional-filled of co-innovation!
relationship with their custo- relationship with
mers. their customers. ” How is L’Oréal reacting
to take advantage of these
Also, using our products isn’t opportunities?
always self-evident, and digi- Second, the internet is an ama-
tal tools allow us to help our zing tool for supporting custo- Our Chairman and CEO, Jean-
consumers understand and use mers throughout a product’s cy- Paul Agon, named 2010 the
them better, and to offer them cle of use, and for strengthening «Digital Year» for L’Oréal. Suc-
personalized, one-to-one ser- brand loyalty. The third advan- ceeding in the digital revolution
vice so we can increase the tage is one of sales. The inter- is a major strategic challenge
quality and perceived value of net makes it possible for brands for the company at the global
using our products. to project themselves right into level, along with winning one
people’s homes, and generate billion new consumers over the
Could you tell us more spe- purchases and repeat purchases coming decade. The year 2010
cifically what opportunities through online sales. was therefore one of intense
Digital transformation review n°01 - 07

7. strategy
Beauty and digital: A magical match
effort, particularly for a crisis
exit phase, with strategic po-
licies impacting our 23 brands
and all our countries.
This mobilization was expressed
in a number of ways. First, we
made sure we had the necessary
expertise in-house. We formed a
team of 300 people specialized
in digital technologies, with
the goal of providing digital
expertise at every strategic point
in the company, and we have
a global digital manager to pilot
this cross-functional network
who reports to me directly.
I would point out here that
digital transformation doesn’t
only concern marketing; rather,
we have digital managers in Marc Menesguen
Managing Director
research, manufacturing, com- of Strategic Marketing
munication and in the sales for L’Oréal
functions.
We also launched a program
to train 15,000 individuals in
digital fluency in two years,
including the company’s mana-
gers.
Digital transformation review n°01 - 08

8. strategy
Have you defined measurable developing m-commerce, sales strategy. Whereas in the mass
objectives for your digital via mobile phones. And within media model, typically centered
strategy? Europe, the United Kingdom is on television, everyone received
coming off the starting block the same message, with digital
We plan to double investment first. media we can design much
in digital media in 2011, from more targeted marketing.
5% to almost 10%. L’Oréal is the Marketing is key to L’Oréal’s
third largest advertiser in the business model. Has the tra-
world, so you can imagine the ditional marketing mix been
scope of this goal. More gene- transformed by the emergence “ The real goal
rally, I would note that we work of digital tools? is to raise our
using a test & learn approach:
digital IQ as a
The real goal is to raise our di- Of course. The difference
way to structurally
gital IQ as a way to structurally between the traditional model
reinforce our business model. and the new one that is emer-
reinforce our
ging, is a difference between business model. ”
We have chosen specific units positioning and movement.
within the group to play a pio- Today it’s not enough to think
neering role. Their job is to about brand positioning. Digital
prepare the ground and assem- transformation allows brands I think this trend will become
ble the skills needed, and then to interact directly with their even more marked in the future
transmit them to the other units. customers. This communica- with the rise of mobile devices,
In e-business, for example, the tion requires an agility from which will become an increasin-
luxury products divisions in the brands as well as an ability gly important interface between
the United States and Korea to remain in motion and adapt brands and consumers. With
are leading the charge, so they continuously. It’s a challenge, geolocation, for example, we
have gained a head start with but also an extraordinary op- can target messages more pre-
6% and 12% of their sales on- portunity. In the new marketing cisely and adjust to customers
line, respectively. Japan, on the that is developing, the consu- whether they are out shopping
other hand, is responsible for mer is even more central to our or at home.
Digital transformation review n°01 - 09

9. strategy
Beauty and digital: A magical match
Does digital transformation priorities and guidelines. They greater proximity and interacti-
increase the complexity of deploy integrated marketing vity, but in the end customers
managing your brands? campaigns to ensure that the want the same thing: They want
brand receives the same expres-
L’Oréal is historically a compa- sion no matter what the point
ny of innovation and conquest, of contact. “ We plan to
so our teams are excited by this double investment
new challenge. That said, like As for monitoring economic effi-
in digital media
any major change, digital trans- ciency, it has been strengthened
in 2011, from 5%
formation brings with it ques- with the creation of the Stra-
tions and risks, two of which tegic Marketing division that I
to almost 10%. ”
come to mind. run. This organization is meant
to support the markets in iden-
The first is the risk of a frag- tifying best practices, and those to be surprised, seduced, drawn
mented image and loss of brand that are less effective. We work in by a great story. Digital
equity, in the sense that multiple on aligning key performance transformation lets ad writers
points of contact with a brand indicators for digital campaigns tell even more fabulous stories
can lead to divergences between worldwide, which allows us to to reinforce our brands.
the global and the local. There is measure the effectiveness of our
also a risk of insufficient return digital initiatives and organize Do social networks accentuate
on investment, of our economic reporting of experiences and the risks of a negative
resources being spread thin. sharing of best practices. reputation?
We are prepared to respond to Has the way you advertise The internet has held risks for re-
these risks with a matrix struc- changed? putations even before the emer-
ture for our 23 global brands gence of social networks. This
and the large regions that pilot Whether on- or off-line, let’s risk is real, whether we like it or
business in the different coun- not forget that the main success not, and we are very attentive
tries. Each brand develops its factor for a campaign is its crea- to it. We are part of the conver-
own digital strategy with clear tivity. Digital channels allow sation, interacting ourselves
Digital transformation review n°01 - 10

10. strategy
on the internet around every- This is a significant aid in choo- gering 72% of them came from
thing that is said. This has been sing and buying cosmetics. emerging markets, which shows
part of our company strategy how digital transformation lar-
for several years already. In Human Resources, last year gely coincides with the geo-
we developed “Reveal”, a re- graphic shift that is underway.
How is your digital strategy cruiting website that takes We recruited 120 people in
expressed in other functions? the form of a business game 20 countries with this game.
(www.reveal-thegame.com).
In Research & Innovation, our I could give you similar details
strategy has always been based for Manufacturing, Corporate
on proximity to our consu- Communications, and all the
mers around the world, with “ The difference group’s functions. The digital
more than 3,400 researchers between the revolution truly impacts every
working at 18 research centers traditional model area of the company.
in 12 countries. Digital techno- and the new one
logy allows us to achieve even that is emerging, Is the impact of the same
greater proximity, practically scope for every division?
is a difference
entering consumers’ homes and,
between positioning
thanks to imaging technology, The impact is strong everywhe-
we can get «inside their skin.»
and movement. ” re, but is expressed differently
depending on the business.
Sales functions, for their part, Each division and each brand
need to integrate e-distribution The applicant enters L’Oréal develops its own digital stra-
techniques. For example, we as a virtual trainee, takes tegy based on its specific cha-
are testing on-line promotions. part in the activities he or she racteristics.
We’re also taking part in a very is interested in – product inno-
interesting experiment launched vation, marketing, production – The Luxury division sees digital
by Carrefour Planet, an interac- and receives a grade. Last year tools as an opportunity to create
tive makeup counter where wo- 61,000 people participated from an image with incredible global
men can apply virtual makeup. 160 different countries. A stag- consistency, but also as a way
Digital transformation review n°01 - 11

11. strategy
Beauty and digital: A magical match
to improve personalized service example, Redken, in the Uni- in this area, the Luxury Pro-
and a path to increasing busi- ted States, designed a strategy ducts division, generates 6% of
ness through e-business tools. for animating its network on its sales in the United States on-
To date, this division has made Facebook, with highly targeted line. Where direct contact with
the greatest strides in imple- distribution of samples and ex- our customers through e-com-
menting online sales. cellent return on investment. merce offers the greatest value,
is in terms of marketing, and
For the Consumer Products di- In the Active Cosmetics division, assessing the effectiveness of
vision, the primary challenge is Vichy has developed a comple- our strategies. This higher awa-
to optimize advertising impact. tely novel website for online skin reness also benefits our off-line
diagnosis (www.vichyconsult.fr), business, and thus our distribu-
only made possible by the in- tor partners. The brands with
“ Digital transfor- ternet. the best online performance are
also those that sell best in sto-
mation lets ad
Finally, the Body Shop, which res, such as Kiehl’s.
writers tell even
is both a global brand and a
more fabulous network of stores, has expanded What are the main successes
stories to reinforce its online service and sales pos- of your digital strategy?
our brands. ” sibilities with the internet.
Lancôme had a number of di-
Does this direct channel gital successes in 2010, both in
Digital tools help generate more between the brand and consu- support of product launches and
relevant, targeted messages with mers bring your relationships through a very impactful colla-
more content. with your distributors into boration with Michelle Phan, a
question? video blogger in the United Sta-
In the Professional Products tes. She is a huge fan of Lan-
division, we have an extraor- No, not really. For one thing, côme, and became the brand’s
dinary chance to enhance our e-commerce is still a fairly mar- online beauty advisor. Every
relationships with our global ginal phenomenon. Our division month she posts a video with
network of hair stylists. For that has advanced the farthest advice that is seen by more than
Digital transformation review n°01 - 12

12. strategy
a million viewers. They are so Apple has listed us among their It’s a challenge for all of us. We
successful that five of the ten best apps! can legitimately characterize
top make-up videos on YouTube this as a cultural revolution.
are hers! What lessons do you draw But the pioneering spirit is a va-
from your failures? lue that has been shared by all
Lancôme has a similar ap- L’Oréal employees for decades.
proach in China, with a social We haven’t experienced any Don’t forget that Lancôme was
network called Rose Beauty. real failures, as every expe- the first luxury cosmetic brand
With 500,000 fans and more rience contributes to our digital to launch a website, in 1999!
than two million posts per year, learning. However, we have no- One year later, we were again
the website is an excellent lever ticed some dispersion and frag- the first luxury brand to launch
for Lancôme, which I remind mentation effects in past years, an e-commerce website in the
you is the top luxury brand in with local initiatives that may United States! Today, digital
China. have been very interesting, but transformation is an exciting
were not entirely in sync with challenge that involves all of
In the Consumer Products divi- the brand values. This led us our 66,000 employees around
sion we launched Instant Beau- to strengthen the brands’ stra- the world.
ty, a mobile phone application tegic priorities and develop in-
that lets customers scan a pro- tegrated campaigns. The main
duct’s bar code in the store and lesson from these experiences
get complete information about is the need for consistency of
the product and how to use it. off-line and online strategies:
For Maybelline, we are also cur- Our strength lies in a compre-
rently testing iAD, a new gene- hensive vision, and mistakes
ration of advertising for iPhone. mainly come from a lack of
In particular, it allows very pre- consistency.
cise targeting, and raises vi-
sibility in the Apple universe, What are the reactions to this
which aligns with the brand’s transformation within the
“hip” character. Especially since company?
Digital transformation review n°01 - 13

13. Close-up
Transform to the Power of Digital:
Digital Transformation as a Driver
of Corporate Performance
By Didier Bonnet, Global Head of Practices, Capgemini Consulting and
Patrick Ferraris, Global Leader, Technology Transformation, Capgemini
Consulting
Digital tools and technologies have invaded the business
environment, triggering significant changes in the way we
work, communicate, and sell. Industries and governments alike
are undergoing a digital transformation either crisis-induced,
as part of a core strategy, or as part of a more controlled
business transition. Under all circumstances, leaders need
to be well prepared to anticipate the current and future impact
of this enduring trend and steer their corporations accordingly
at the right speed.
T he journey toward digi-
tal transformation entails
harnessing its benefits - such
journey depending on its starting
point and the digital maturity of
its industry and products or ser-
An Enduring TrEnd AffEc-
Ting EvEry indusTry… buT
AT A diffErEnT PAcE
as productivity improvement, vices. It is imperative for busi-
cost reduction, and innovation nesses to remember that digital Over the past decades, digital
- while navigating through the transformation is not just about technologies have progressively
complexity and ambiguity brou- technology. Instead, like any been embraced by organizations
ght about by the changes in the other business transformation, a driven by advancement in tech-
digital economy. roadmap across people, proces- nology, changing consumer be-
We believe that every organiza- ses, and technology will enable havior, increasing globalization
tion is likely to tread a different organizations to successfully of the workforce, and a desire
path in its digital transformation navigate this transformation. to be more productive and inno-
Digital transformation review n°01 - 14

14. Close-up
vative (see Figure 1). This digi- Although the use of digital to- for the Internet it was less than
tal wave has not only fuelled a ols in the enterprise is not a new 7 years, and for tablets it can be
number of fundamental changes phenomenon, what has changed expected to be around 4 years2.
in the way organizations pro- in recent years is the accelera- This breakneck pace of techno-
duce, sell, and serve, but also tion of both the capabilities of logical change has triggered new
changed the way employees these tools as well as the pace consumer behaviors and usage
work, communicate, and colla- of adoption by customers, em- patterns which are having a pro-
borate. It has therefore created ployees, and organizations alike. found impact on organizations.
a leadership and transformation For instance, while mobile te- Simply stated, digital transfor-
challenge for most industry par- lephony took around 13 years mation is the increasing adoption
ticipants. to reach critical mass-market1, of digital tools and technologies
Figure 1: Digital Transformation of Enterprises
Communication
VoIP Smartphone UCC Telepresence
Online
Knowledge
Collaboration
Base
IP-PBX E-mail IM Cellphone Video
Conferencing
LAN Voice
Voicemail
V based Mail
Multi Channel Conferencing Optical Enterprise
Pagers
P
Customer Interface
Knowledge Social
Snail Mail PBX Base Network
In-Person Team
Store Meetings Magnetic
Fixed Line Phone Knowledge
Online Physical Base
Tele Fax Knowledge Base Netmeeting
Channel Channel Livemeeting
Door to White-boarding
Door Sessions Key:
Social
Roadshows Typewriters
Networking 1950 -1970
Physical
Files PC Digital Early
Cheque Laptop Days
Credit Predominantly Cloud
Tele Card Manual
Cash computing 70’s & 80’s
b
-banking Manufacturing Tape Digital
B
Branchless Drives Progression
Infrastructure
B
Banking CD
Electronic Funds Semi Automatic
ATM Transfer Manufacturing
The 90’s
Smart Digital
E-Commerce Computer Aided Manufacturing Manufacturing Acceleration
Storage as a 2000 - Present
Tablet Digital
m-Commerce service
Transformation
Commerce / Financial
Source: Capgemini Consulting Analysis
1
Years necessary for an invention to be used by a quarter of the US population.
2
Capgemini Analysis; The European environment Agency, State and outlook 2010: “Accelerating technological change:
racing into the unknown”, Nov 2010; Forrester Research eReader Forecast, 2010 To 2015 (US), July 2010.
Digital transformation review n°01 - 15

15. Close-up
Transform to the Power of Digital:
Digital Transformation as a Driver of Corporate Performance
by an organization to funda- Faced with this transformation HArnEssing THE bEnEfiTs of
mentally alter both its internal challenge and the need to stay digiTizATion
and external processes and func- relevant in one’s industry, lea-
tions. All industry segments and ders have to embrace the impli- Digital transformation should
governments have been touched cations of this enduring trend not be an end in itself. Like all
by this new digital reality, which on their organizations in order other forms of business trans-
has significantly altered mana- to steer their strategy and drive formation it should be guided
gement practices in areas from better operational performance. by clear managerial goals and
hospitals to hypermarkets and Unfortunately, recent history is realizable business benefits.
financial services to the future replete with examples of orga- Once a clear roadmap has been
of public services. As a result, nizations which have not been defined, digital transformation
it has become a high priority able to keep pace with this new can help organizations address
on the leadership agenda, with digital reality. The recent ban- their most significant priorities
nearly 90%3 of business leaders kruptcy of movie rental com- and achieve both internal and
in the US and UK expecting an pany, Blockbuster, owing largely external benefits, in areas such
increasing strategic contribution to its inability to rapidly hone a as innovation, customer expe-
of IT and digital technologies new business model5, is one such rience, efficiency, or producti-
on their overall business in the example. vity (see Figure 2).
coming decade. With the Inter- Every industry is going through
net, Hi-Tech, and Media sectors a digital transformation, some It’s About Productivity
only accounting for approxima- crisis-induced, some as part of Improving productivity is a key
tely 10% of US GDP, we believe their core strategy, and some as driver for sustainable growth. In
that the real transformation will part of a more controlled transi- recent years, productivity growth
be seen in the remaining 90% of tion process. Under all circums- in developed economies has been
‘traditional’ industries’4, where tances, leaders have to steer their steadily falling and is signifi-
customer and employee behavior corporations at the right speed, cantly lower when compared to
is fast evolving. We can expect a taking into account the current emerging markets. For instance,
largely similar trend in other de- and future competitive situation during the periods 1995-2005
veloped countries as well. in their respective industry. and 2005-2008, Total Factor
3
Gartner: “Gartner CEO and Senior Business Executive Survey, 2010: Anticipating the Post-Recession Landscape”, March 2010.
4
Interview with Andrew McAfee, Author of Enterprise 2.0: New Collaborative Tools for Your Organization’s Toughest Challenges.
5
Blockbuster failed to effectively adapt its storefront model to online technology.
Digital transformation review n°01 - 16

16. Close-up
Productivity6 in the US and EU- thereby exerting additional pres- improve productivity by auto-
15 nations grew at the lowest sure on productivity. In order to mating tasks, enabling better
rates when compared to deve- stay competitive, companies in decision-making, and freeing
loping markets in India, China, developed nations need to find employees up to create value in
CEE, and Africa7. On top of this, new sources of productivity if other areas. In the United States,
we can add socio-economic they want to remain relevant on IT was responsible for two-thirds
trends such as the shrinking and the global stage. of total factor growth in produc-
aging workforce. In Germany, There is clear evidence that im- tivity between 1995 and 2002
Italy, and France, the working plementation of digital techno- and virtually all of the growth
age population8 is expected to logies has been a key driver of in labor productivity10. Similarly,
fall by 15%, 8%, and 6% respec- corporate productivity. Digiti- EU firms that adopt e-business
tively between 2010 and 20309, zation has helped organizations practices (such as online sales
Figure 2: Key Benefits of Digital Transformation
Internal
Opportunities
Drive organizational
Reduce selling, delivery, and employee
and service costs productivity by
Accelerate time to leveraging digital tools
External market
External
Opportunities Create new digital
Opportunities
Multichannel and integrated
customer experiences products such as
across mobile, social and Cost and Time Productivity consumer devices,
online platforms Saving Improvement eBooks, and smart
meters
New New
Customer Products /
Experience Services
Use tracking or Operational
analytical tools to Extend service
analyze customer offerings to
behavior patterns Customer New technology enabled
and generate Insights Customer Product Platforms platforms such as
insights online and mobile
Source: Capgemini Consulting Analysis
6
Total Factor Productivity Growth measures the Growth of GDP over the combined contributions of total hours, workforce skills, machinery and structures and IT capital.
7
The Conference Board Total Economy Database, Summary Statistics 1995-2011, Jan 2011. 8 Working-age population = 15-64.
9
Stanford Center on Longevity: “ Population age shifts will reshape global work force”, April 2010.
10
ITIF: “Digital Prosperity: Understanding the Economic Benefits of the Information Technology Revolution”, March 2007.
Digital transformation review n°01 - 17

17. Close-up
Transform to the Power of Digital:
Digital Transformation as a Driver of Corporate Performance
and purchasing) are twice as li- mer acquisition cost on online novation and the main driving
kely to report enhanced produc- channels is 50% less than that force behind product and ser-
tivity and expanded employment on offline channels13. Similarly, vice innovation across sectors.
when compared with firms that when compared to call-center An EU-commissioned survey
do not use Internet technologies technical support, approximate has found that product and
to innovate11. cost per contact is nearly 92% service innovation in most of
However, research12 points out cheaper for a virtual agent and the largest industries in Europe
that while investment in digital 99.2% for web self-service14. is either directly related to, or
capital has a strong correlation The cost benefits of digitization enabled by, ICT16. Leading the
with high productivity, techno- span a whole range of indus- pack are the energy supply and
logy alone is not the most im- tries and functions. The use of telecommunications services
portant driver of productivity. RFID tags in the supply chain sectors where 89% and 86%17
Instead, it is a combination of a environment can help reduce of companies attribute product
digitally savvy corporate culture, inventory handling and logis- and service innovations to ICT.
a distinct set of organizational tics costs. Remote health care
practices, and digital tools that enables monitoring of a pa-
results in significantly higher
productivity.
tient’s symptoms in real-time at
relatively low cost. Smart me-
“ In the US,
in 2010, adoption
ters can save utilities millions of e-business practices
It’s About Saving Costs and of dollars by enabling them helped save companies
Time-To-Market to read meters remotely and $528 billion through
Digitization not only helps or- controlling demand. In the US,
ganizations reduce operatio-
nal, communication, travel,
in 2010, adoption of e-business
practices helped save companies
efficiency gains
”
marketing, selling, and pro- $528 billion through efficiency Digital tools also provide an
duct development costs, but gains15. excellent platform to engage
also significantly accelerates stakeholders in co-innovation,
problem resolution and time- It’s About Driving Innovation brand creation, and problem
to-market. For instance, custo- Digitization is an enabler of in- resolution. Philips successfully
11
Information Technology and Innovation Foundation: “The Internet Economy 25 Years After .com”, March 2010.
12
MIT Sloan, Center for eBusiness : “The digital organization: seven practices of highly productive firms”, May 2003.
13
Forrester Research: “2009 Cost Of eBusiness Operations And Customer Acquisition”, May 2009. 14 Forrester: “It’s Time To Give Virtual Agents Another Look”, March 2010.
15
Information Technology and Innovation Foundation: “The Internet Economy 25 Years After .com”, March 2010. 16 Information and Communication Technology.
17
European Commission: “ICT and e-Business for an Innovative and Sustainable Economy”, 2010.
Digital transformation review n°01 - 18

18. Close-up
created a private online com- customers over multiple touch- improve retention, up-sell, and
munity, Sensorium, in 2007 to points, providing a seamless cross-sell, and anticipate the
co-create better products with and integrated multi-channel success of new product launches.
customers and deliver on-de- experience. Defining and for- National Instruments, a leader in
mand insights to multiple pro- mulating a multi-channel stra- virtual instrumentation, has suc-
duct teams. In the last three tegy also enables companies to cessfully adopted a web-analy-
years, the community has hel- maintain a 360 degree view of tics solution for lead generation
ped Philips in identifying post- the customer and balance sales, and customer engagement. By
purchase concerns, creating ef- customer care, and retention tracking on-site visitor behavior,
fective product positioning, and across channels. Moreover, by NI has achieved a 3% increase in
understanding technical speci- aligning organizational struc- the number of visits that reach
fications for a new product18. tures and incentives, organiza- the point-of-sale21.
tions can drive maximum value As outlined above, the business
It’s About Transforming across all channels. In the UK, imperatives and benefits of di-
the Customer Experience 76% of marketers have expe- gital transformation are com-
Digital channels and platforms rienced improved brand expo- pelling and have to be addressed
are helping organizations ex- sure, 68% better customer servi- at all levels in the organization.
tend their reach to a wider and ce, and 62% increased revenue, However, the path toward digital
more engaged ecosystem of cus- by adopting a multi-channel transformation is not without its
tomers and partners. The high strategy19. challenges.
adoption rate of mobile devices Today, more than 70%20 of all
and Web 2.0 tools - such as so- digital information is consu- A TrAnsformATion wiTH
cial media, collaboration appli- mer-generated and comes from iTs own cHAllEngEs
cations, smart phones and tablet outside the organization. Aided
computers - is changing the way by sophisticated analytical to- In order to identify the key bar-
people share information, learn, ols, companies can leverage this riers in the successful imple-
communicate, and interact. For ocean of information to extract mentation of digital transforma-
each transaction, organizations better customer insights, maxi- tion programs, we conducted a
can interact and engage with mize customer lifetime value, series of interviews with a num-
18
Forrester Research: “Case Study: Philips Achieves Consumer Proximity Using Private Online Communities”, January 2011.
19
DBG Report: “Multichannel Marketing Today”, September 2010.
20
2010 Digital Universe Study: “A Digital Universe Decade – Are You Ready?”, April 2010.
21
Forrester Research: “Case Study: National Instruments Replatforms Web Analytics”, November 2010.
Digital transformation review n°01 - 19

19. Close-up
Transform to the Power of Digital:
Digital Transformation as a Driver of Corporate Performance
ber of global corporations from ocean of data. Between 2009 pour an overwhelming amount
across different industries. Our and 2020, the amount of digi- of data into the digital ocean.
analysis suggests that organiza- tal information created and re- The more information organi-
tions across the globe are facing plicated in the world is expec- zations receive, the harder it
a common set of challenges as ted to grow 44 times to reach gets to decipher what is credible
they tackle these new digital an unprecedented 35 trillion and useful. Moreover, it beco-
realities. These challenges can gigabytes22. In fact, according mes even more difficult to per-
be broadly classified into four to estimates, more digital infor- form tasks and take decisions.
categories (see Figure 3). mation was produced in 2009 Employees are unable to cope
alone than all information since with the rising volume of infor-
Manning the Information the beginning of time23. As inte- mation and this adversely im-
Floodgates ractions become more frequent pacts on their morale and pro-
The digital explosion has floo- and information-rich, custo- ductivity. A majority (62%24 on
ded organizations with an mers, partners, and employees average) of workers across the
globe believe that the quality of
their work is hampered because
Figure 3: Key Challenges in the Path to Digital Transformation
they cannot process and make
sense of all the information at
 Information flooding from
multiple sources
 The all-powerful customer their disposal fast enough.
 Managing changing customer
 Analyzing information for
actionable intelligence
sensitivities Though organizations realize
 Developing the right social
 Managing and securing large
volumes of data
media, Web 2.0, and mobile
capabilities
the importance of analytics,
Change in
many of them do not have the
Information
Overflow
Customer
Behavior skills - particularly advanced
Key predictive analytical capabili-
Challenges
 Avoiding organizational and  Crafting a clear digital
ties - to undertake it. Lack of
technical silos Silo Based Organization/ roadmap at the top
 Adopting a holistic approach
Approach Culture Gap management level senior executive support, a silo
 Workforce transformation
 Change Management
approach, an inexperienced
workforce, and insufficient in-
vestment are some of the big-
Source: Capgemini Consulting Analysis gest roadblocks.
22
2010 Digital Universe Study: “A Digital Universe Decade – Are You Ready?”, April 2010. 23 MIT Sloan Management Review, 2011 MIT Sloan CIO Symposium.
24
LexisNexis Press Release:” New Survey Reveals Extent, Impact of Information Overload on Workers; From Boston to Beijing, Professionals Feel Overwhelmed,
Demoralized”, October 2010.
Digital transformation review n°01 - 20

20. Close-up
Keeping Pace with Customer pany had to scrap the launch. of clarity around customer and
Expectation In certain industries, such as social-media ownership, ina-
The increasing proliferation of music, changes in consumer be- bility to tailor business models
digital platforms has funda- havior have completely disrup- catering to changing consumer
mentally altered the way cus- ted traditional models and ren- behavior, and failure to take an
tomers interact with brands, dered many players obsolete. “outside-in view” of their busi-
research and buy products, and ness.
influence the decision making
of other customers. Customers
are increasingly becoming wary
“ More digital
information was
Adapting the Organization
and Culture
and distrusting of traditional produced in 2009 alone Alligning the existing corporate
marketing vehicles and ins- than all information culture with new digital realities
tead are turning to online so- since the beginning is one of the main inhibitors in
cial networks, blogs, wikis, and the digital transition of compa-
community forums to formu-
late their brand perceptions and
of time
” nies. One of the clearest indica-
tors is that a clear governance
make purchase decisions. To- Despite being faced with this process for the transformation is
day, consumers trust consumers very visible customer expecta- often lacking. In our interviews
more than they trust brands. tion challenge, many companies with CXOs, it has become clear
While 50%25 of consumers do have been slow in developing that one of the major issues is
not believe in the advertising the right skills and capabilities the lack of accountability in di-
promises of brands, 73%26 trust to manage this new customer gital transformation programs.
the recommendations of friends sophistication. For instance, Further, enterprises’ traditional
and family. 56% of Fortune 50 companies decision-making systems are
Companies can no longer afford still do not have social-media too vertical and too intrinsical-
to ignore the voice and preferen- icons on their home pages while ly slow to keep pace with rapid
ces of the customer. Customer 60% hide their twitter streams27. technology-driven transforma-
backlash against GAP’s recently This failure of organizations to tion. Consequently, corporations
launched new logo was so in- rapidly adapt themselves can be have started to experiment with
tense on the web that the com- attributed to factors such as lack various organizational formats
25
“The future of advertising agencies: learnings from Forrester”, Feb 2010.
26
Forrester Research: “Three Ways To Find, Create, And Energize Advocates”, Sep 2010.
27
Adage: “Most Fortune 50 Brands Still Hiding Their Social Media”, April 2011.
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21. Close-up
Transform to the Power of Digital:
Digital Transformation as a Driver of Corporate Performance
- such as cross-functional tas- program, there can be inherent have responded to the impact
kforces and identifying digital reluctance and resistance to of digitization through multi-
leaders at board-level - in order change from within, especially ple, separate and uncoordinated
to adapt their culture to digital from middle management. Di- initiatives, even when the im-
challenges. gitization results in the demo- pact is felt by the same brands,
Far too many enterprises are cratization and free-flow of customers or employees. Func-
investing in digital tools and information. Managers perceive tional silos frustrate interaction
technologies without trying to this as a threat to leadership be- and create information silos,
drive changes in the operating cause they have less control of making it harder to connect the
model, working practices, and information flows. For instance, right people in the right ways to
culture. Companies often focus the US Department of Defence create and maximize value.
too much on the technical and (DoD) had to face a lot of inter-
customer-facing aspects of di- nal resistance during the formu-
“ It is the obstacle to
gital transformation, forgetting lation of its social media policy
is not technology
that true value can only be le- as the traditional military hie-
that
veraged if we align people and rarchy and the network security
processes. As Raffi Amit, Pro- group were used to doing things digital transformation,
fessor at Wharton, pointed out:
“It is not technology that is the
the old way28. It is important for
corporations to have confidence
it is people
”
obstacle to digital transforma- in their employees by involving
tion, it is people”. An aging HR them closely in this journey and Similarly, a completely techno-
infrastructure, non-alignment giving them ownership of pro- logy-centric approach often fails
between business and HR lea- cesses. to challenge the fundamentals
ders on the most critical busi- of a company’s business model.
ness drivers, and ineffective Overcoming Silos This is because this approach
rollout of change management Our discussions with organiza- aims to automate existing pro-
programs to train employees on tions have surfaced a common cesses rather than attempting
new digital ways of working are pitfall - adopting a silo-based a step-change in performance.
some of the key barriers. approach, be it technical or or- In addition, technology-led
As with any transformation ganizational. Many enterprises transformations often alienate
28
ReadWriteWeb: “U.S. Department of Defense Goes Social...Yes, Really!”, March 2010; Scout Comms:
“The Department of Defense gained a social media beachhead in 2010”, Feb 2011.
Digital transformation review n°01 - 22

22. Close-up
IT from the business functions, traditional business models. Or- Strategic Leadership
resulting in significant resis- ganizations need to tread a ca- and Boundary Definition
tance to change. Digital trans- reful path toward digital trans- Digital transformation is about
formation is first and foremost formation, crafting a winning leadership. It has become the
an enterprise-wide business strategy and a clear roadmap ultimate challenge in change
transformation and technology across people, processes, and management because it affects
should be seen as a second-or- technology (see Figure 4). not only industry structures and
der priority. strategic positioning, but also all
To overcome the silo mentality,
Figure 4: Navigating Digital Transformation: A Framework
corporate leaders should take a
holistic approach, cutting across Digital Strategy & tranSformation
all aspects of their value chain • Value chain positioning • Value proposition / Business models
and management functions. As • Digital transformation strategy • Innovation
well as the many challenges
Digital cuStomer
outlined here, this is as much people 2.0 experience analyticS
about a fundamental change in
• Integrated talent • Digital Marketing • Customer
mindset.
management • Multi-channel analytics
• Connected management • Advanced
nAvigATing your own workforce/ • Customer Experience segmentation
collaboration Optimization • Performance
digiTAl TrAnsformATion • Change management
management/ Digital operationS
• External partner
training metrics
Orchestrating your Digital • Target operating
model • Benchmarking
Transformation
• Process digitization • Workforce
Digitization can extend the • Digital business analytics
reach of organizations, impro- platforms
ve management decisions, and technology Strategy & tranSformation
speed the development of new
• Technology roadmap • Technology • Technology
products and services. At the to digital governance and innovation
same time, overly rapid adop- • Information organization
management strategy
tion of technologies can disrupt
Source: Capgemini Consulting Analysis
Digital transformation review n°01 -23

23. Close-up
Transform to the Power of Digital:
Digital Transformation as a Driver of Corporate Performance
levels of an organization (every achieve. Similarly, the Human methods can quickly be put into
task, activity, process) as well as Resources department must also “proof-of-concept” pilots and,
the extended supply chain. Lea- be involved, given the impor- when successful, rolled out to
ders must constantly challenge tance of the people dimension the entire organization.
their organizations to ensure in digital transformation. Digital
that this technology-enabled transformation requires a mix An Outside-In View of
change can unlock productivity of skills which are often scat- Customers – Re-inventing
gains and significant competiti- tered across the enterprise and Marketing
ve advantage. At the same time, its external partners. To succeed
they should understand where in this quest, leadership should
“ Many enterprises
and how the fundamentals of not hesitate to redefine the tra-
their current operations could ditional boundaries between its
have responded to
be unsettled by agile new en- different entities, making them
the impact of digitization
trants or new business models. permeable and porous. We see,
A significant issue facing the for example, the marketing or through multiple, separate,
top-management is that most commercial departments acqui- and uncoordinated
companies have traditional de-
cision-making systems that are
ring technical skills to address
rapid technological changes.
initiatives
”
not well adapted for the digital Conversely, IT organizations are
world: they are too vertical, too strengthening their marketing Marketing is undergoing the
slow to deal with the cross-func- and sales expertise in order to most fundamental change in
tional, technological and rapid better serve their companies. its history. The increasing em-
nature of this transformation. Strategy formulation needs to powerment and sophistication
For instance, when focusing on gradually move away from the of consumers - together with
customer issues, you need the linear, annual process it once the proliferation of new chan-
active participation of the Mar- was. Once strategic directions nels, digital technologies, and
keting, Sales and IT organiza- are understood, senior executi- tools - is forcing marketers to
tions. However, historically, ali- ves need to steer their organi- rethink the way they operate
gnment between these different zations into virtual laboratories and the way they engage cus-
functions has been difficult to where new applications and tomers. The result is an oppor-
Digital transformation review n°01 - 24

24. Close-up
tunity to dramatically improve think «outside-in» about their damental lever of transforma-
the efficiency and effectiveness customers and markets. Instead tion. Leaders should focus on
of investments in marketing, of thinking about finding cus- a clear people vision and try to
advertising, and channel mana- tomers for their products and bring about inherent changes in
gement. solutions, marketers need to the way people work and colla-
Traditional marketing focuses think about finding products borate. There are a number of
on increasing reach and fre- and solutions for their custo- key challenges along the way:
quency by pushing information mers. They need to understand professionalizing and web-ena-
and offers through a variety of what activities customers per- bling end-to-end people pro-
loosely aligned channels. Howe- form as they evaluate, buy, and cesses throughout the organiza-
ver, the future of marketing in a use their products and services. tion, fostering collaboration and
digital world is to develop and They need to think deeply about information exchanges between
sustain unique, personalized re- when and where they hand-off communities of knowledge
lationships with customers by products, services, and infor- workers to maximize producti-
collaborating and partnering mation to their customers. They vity and speed-to-market, and
with them through their own need to ask which activities they adapting traditional organiza-
trusted networks. For instance, can perform better than custo- tion models to the new demands
in 2010, Coca Cola cut adver- mers. Conversely, they need to of the digital world.
tizing spending on television ask what activities customers Digitally powered tools and
by 6.6 % globally, and instead can perform better than the en- processes must be developed to
invested more on social media terprise. encompass the entire employee
campaigns via platforms such lifecycle. They should comple-
as Facebook, Twitter, and You- People at the Heart of tely transform the way people
Tube29. The social media stra- Transformation join, learn, perform, earn, grow
tegy of the company is aimed at As in all forms of transforma- and leave the company. Leading
long-term sustainable engage- tion, people need to be mobi- global organizations are also
ment, developing advocacy, and lized and engaged. Too often embracing Enterprise 2.030 to-
encouraging brand loyalty. we see the technical nature of ols to foster a connected work-
The new digital customer expe- digitization resulting in compa- force where new forms of col-
rience requires that companies nies underestimating this fun- laboration generate significant
29
Socialmediatoday: “Coca-Cola Cuts Ad Spend by 6.6% and Invests More in Social Media”, March 2011.
30
Harvard Business School Professor Andrew McAfee coined the term «Enterprise 2.0» in 2006 to describe how Web 2.0
technologies could be used on organizations intranet and extranets.
Digital transformation review n°01 -25