For Consumer Firms, It's All Hands on Deck
Constant, disruptive change is the new normal for organizations. Future success will be determined by their ability to transform not just once, but continuously. We call this “digital sustainability,” and we built a data-driven index to analyze what digitally sustainable organizations do differently. In this series, we share key findings from the research, including the leadership and organizational capabilities needed to thrive in the digital world.
Over the last five years many consumer-facing firms have built robust digital platforms, increased revenue from ecommerce considerably, built out an internal database with information on millions of customers, connected with them on social media, and offered on-demand pickup or delivery fast enough to rival Amazon. It may seem like these firms have transformed themselves enough for the future.
It’s not enough, say experts. The reality is that, even with the investment, many consumer organizations are so far behind not just their digital competitors, but also organizations in other sectors as to still be considered in the infancy of their transformation process. For instance: loyalty cards are so new a phenomenon for many consumer firms that many consumer organizations lack data on customers who used cash or check to pay for something as recently as five years ago.
“Digital is all about managing data, interactions and tracking people,” said Craig Rowley, a Korn Ferry senior client partner in the consumer practice. “The Consumer industry is only now starting to move from knowing where its customers are to who they are, what they are buying, what motivates them to buy, and how to service them in the most convenient way possible.”
As a result, according to a study commissioned by Korn Ferry and conducted by Oxford Analytica on digital sustainability, or the capacity of organizations to continually transform to respond to digital change, the Consumers industry came in last out of five industries researched, scoring just 22 out of 100. The global study ranked 362 organizations across five industries and 14 countries on five dimensions— Agility, Connectivity, Openness & Transparency, Empowerment & Alignment, and Discipline & Focus— and assigned a score out of 100 that reflects overall digital sustainability and performance in each dimension. The Consumer industry’s overall score of 22 was ten points less than the fourth-place finisher, Industrials, and 51 points behind Financials, the top performing industry in the index. (Technology and Life Sciences came in second and third, respectively).
One doesn’t have to look much further than the business news cycle for evidence to support the industry’s lack of digital sustainability. In 2017 Toys R Us filed for bankruptcy, Macy’s laid off thousands of workers, and Amazon bought Whole Foods. And that’s just in retail.
It’s tempting to chalk up the industry’s troubles to being underpriced and outmaneuvered by more agile digitally native players. After all, customers and employees have high expectations of consumer companies, and the platforms they use to browse and buy—from Snapchat to Pinterest—change incredibly quickly. But experts say the situation is actually much more complex. The migration of demand to other platforms also forced legacy consumer organizations to starve digital investment, which, in turn, hurt its ability to attract top talent.
Consumer organization Chief Information Officers used to boast about buying tech a few years older than the current standards because all they really had to replace were cash registers. Not anymore. The complexity level involved in digital transformation is particularly acute. Any new technology adoption involves dozens if not hundreds of stores or more, training workers that lack specialized skills, managing the supply chain and more. With revenue driven by daily sales, the consequences of even a small glitch in a new technology rollout can cost a consumer company millions of dollars.
The good news is that consumer organizations score high on one particular dimension of digital sustainability: Openness & Transparency. That’s because CEOs and boards of consumer companies are finally realizing that they haven’t invested to survive, and they need every leader and employee in every division of their organization to understand what the business is trying to accomplish and their role in helping achieve its goals. Despite the already seismic change, the consumer industry is still expected to experience higher levels of digital disruption than other sectors going forward. “What is worrying,” Rowley said, “is that many think that they have completed their digital transformation. But of course, they have only just begun.