From copper mines to handbags

Digitisation and change go hand-in-hand. Take mining. Traditionally characterized by physical labour, it is now an industry that focuses relentlessly on the pursuit of knowledge and new technology.

Codelco is the largest copper producer in the world. Owned by the Chilean State, and employing 18,000 people, Codelco faced a number of transformation challenges at the turn of the century, from driving new productivity in an intensely competitive market to meeting tough sustainability targets.

An important goal of this new future was automation, moving from a physical-intensive model to a knowledge - and technology-intensive one. For Codelco it was a necessary shift, but how could it realise the benefits of digitisation while also safeguarding the well-being of its employees?

Codelco took a hard strategic look at what the future of mining might be. To turn that vision into reality, the company created Codelco Digital. The new business unit had both operational and strategic objectives: to drive initiatives in mining-automation and also to support the company in developing, evolving and communicating a digital vision.

For Codelco, digital maturity represented a shift from a reliance on manual labour towards a knowledge-based model. This was about much more than technology. It involved a new culture, employee engagement, and new skills.

To overcome internal resistance, the organisation used innovation awards to encourage both ideas and engagement. Marco Antonio Orellana Silva , Codelco’s chief information officer, explains: “our company is very conservative, so changing the culture is a key challenge. We created internal innovation awards to promote new ideas and encourage our workers to innovate.”

Today, four mines in Chile are operated automatically: trucks drive themselves, operations are controlled remotely, and information is shared in real-time. And the vision for the future is equally transformative: an intelligent mining model relying on integrated information networks and fully-automated processes.

Digital transformation is harder than it looks, but more rewarding than many chief executives might expect. A joint report by the MIT Center for Digital Business and Capgemini Consulting shows that those companies who are using technology to deliver a fundamental transformation of their business are in the minority, but these so-called “Digerati” are on average much more profitable, outperforming their peers by 26 per cent.

Far from the mining industry is Burberry, an iconic British luxury brand. When Angela Ahrendts took control of Burberry in 2006 as chief executive, the company was significantly underperforming. While the luxury retail sector was growing at around 13 per cent a year, Burberry’s growth rate was under two per cent.

Ms Ahrendts realised that part of the problem was a lack of presence in the channels her customers wanted to use. But as a luxury brand, a poorly planned digital transformation risked dilution of Burberry’s unique heritage. To be effective, the experience had to be exactly the same whether a customer was online or standing in a physical store.

She launched a significant transformation programme covering multiple business areas, from customer experience to operational excellence. Burberry used digital technologies to enrich the in-store customer experience, while at the back end, it rolled-out a global ERP (enterprise resource planning) programme to unify processes and integrate data across the globe. It meant that whatever channel the customer used, the perception of the company would be the same.

As with Codelco, this transformation was about much more than new technology. This was a closely managed change programme to achieve cross-channel consistency, engage employees, secure the right skills, and develop strong IT-business relationships. Specific governance was put in place, new roles were created, and missing skills were developed or acquired.

Ms Ahrendts says “digital has been a catalyst for everything in the company and, when we got everyone on board with this concept, they were clamoring to become even more connected.”

While this transformation is now bearing fruit, the Burbery chief executive already has one eye on the future possibilities: “Consumer data will be the biggest differentiator in the next two to three years. Whoever unlocks the reams of data and uses it strategically will win,” she says.

Codelco and Burberry are true Digirati because they demonstrate a high degree of digital maturity, both in terms of the technology employed and the leadership required to implement the necessary change management. It’s one thing to identify and implement new tools; it’s quite another to sell the benefit of those tools to employees. How you communicate your vision, governance, engagement, and IT-business relationships are just as important as the technology itself.

Digirati deliver a measurably better financial performance than their peers. This is the essence of the digital advantage that is beginning to separate digitally mature and immature organisations. Not only are the Digirati more profitable, but they also achieve higher market valuations, outperforming their peers by an average of 12 per cent.

Why does this matter? Every industry has its Digirati. Every company has competitors that have already begun to gain the benefits of digital transformation, although concentration varies from industry to industry.

The high-tech sector is leading the race just ahead of banking. Travel and hospitality, insurance and telecom companies have many Digirati, too. consumer packaged goods, utilities and retailers have fewer; while manufacturing and pharmaceuticals trail behind.

While there is no “one-size-fits-all” in digital transformation, there are steps all business leaders can take to build their digital advantage.

First, leaders need to frame the digital challenge and focus investment. This means making choices about which digital practices they will excel in, based on an understanding of the pace of transition between the old and the new in their industry, as well as competitive dynamics. It means first concentrating investment in key domains where an advantage can be gained (rather than spreading a little investment in many areas).

Second, leaders need to engage the organisation at scale. This means developing a shared understanding of the digital vision and implementing proper governance structures to ensure ownership and accountability.

With these two steps, business leaders can design and deliver a strategy that will define their organisation’s performance in the new digital economy for many years to come.

Didier Bonnet is Senior Vice-President and Global Practice Leader at Capgemini Consulting.