Digital Reinvention 2016 - Beyond Pilot projects

QUEL ÉTAT DES LIEUX POURLA TRANSFORMATION DIGITALE

DE L’ÉCONOMIE EN 2016 ?

Le présent Référentiel répond à cette question en s’appuyant sur 65 entretiens avec des diri-geants d’entreprises françaises et internationales, membres de Comex ou de directions générales.

En explorant différents secteurs du B2C ou duB2B2C, l’image plus globale d’une phase d’indus-trialisation du digital émerge : au-delà des projets pilotes et des premiers mouvements, la maturité digitale s’annonce.

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Vivek Badrinath | AccorHotels | Directeur Général Adjoint en charge du Marketing, du Digital, de la Distribution et de l’IT

Christophe Verley | ADEO | Directeur Internet GSB

Jean-Christophe Lalanne | Air France-KLM | Directeur Général Adjoint et DSI du Groupe, Membre du Comité Exécutif

Nicolas Ferrary | Airbnb France | Country Manager

Virginie Fauvel | Allianz France | Directrice Unité Digital et Market Management, Membre du Comité Exécutif

Isabelle Moins | Aviva | Directrice des Activités Directes, Digital et Marketing Client, Membre du Comité Exécutif

Amélie Oudéa-Castera | AXA France | DGA AXA Particuliers / Professionnels - Directrice Digital, Marque et Partenariats, Membre du Comité Exécutif

Erick Bourriot | Groupe Beaumanoir | Directeur du Commerce Connecté

Florian Sauvin | Groupe Bel | Chief Digital Officer et Membre du Directoire d’Unibel

Frédéric Mazzella | BlaBlaCar | Fondateur et Président-Directeur Général

Cristina Cordovez de Villeneuve | BNP Paribas | Chief Digital Transformation Officer

Philippe Poirot | Groupe BPCE | Directeur Développement Digital, Transformation et Qualité

Pascal Buffard | CIGREF | Président

Anne Browaeys-Level | Club Méditerranée | Directrice Générale Marketing et Digital

Magali Noé | CNP Assurances | Chief Digital Officer

Hugues Le Bret | Compte-Nickel | Fondateur et Président-Directeur Général

Olivier Gavalda | Crédit Agricole S.A. | Directeur Général Adjoint, Membre du Comité Exécutif

Serge Magdeleine | Crédit Agricole S.A. | Directeur Marketing Groupe et Digital, Membre du Comité Exécutif

Jérôme Hombourger | Crédit Agricole CACF | Directeur Général Adjoint, Développement et Stratégie

Christelle Le Berre | Crédit Mutuel Arkéa | Responsable Projet Stratégique, Membre du Comité Exécutif

Michael Aidan | Danone | Chief Digital Officer

Christian Lou | Darty | Directeur de la Direction Marketing et Digitalisation, Membre du Comité Exécutif

Yann Aubriet | Darty | Directeur du Développement Digital

Simon Baldeyrou | Deezer | Directeur Général Adjoint

Venky Balakrishnan Iyer | Diageo | Global Vice President, Digital Innovation

David de Amorim | Docapost | Directeur de l’Innovation

François Gonczi | EDF | Directeur Numérique d’EDF Commerce

Hervé-Matthieu Ricour | Engie | Directeur Général France BtoC

Christian Buchel | ERDF | Directeur Général Adjoint, Chief Digital & International Officer, Membre du Directoire

Guillaume du Gardier | Ferrero France | Directeur du Digtial

Katia Hersard | Fnac | Directeur e-Commerce et Marketing Groupe, Membre du Comité Exécutif

Stéphane Pallez | Française des Jeux | Président-Directeur Général

Caroline Delorme | Galeries Lafayette | Directrice Omnicanal Branche Grands Magasins

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Éric Wepierre | General Mortors France | Président

Carline Huslin | Generali France | Directrice Transformation Digitale et Expérience Client Multicanal

Thierry Benhaim | Grosbill | Directeur Général

Thomas Vandeville | Groupama | Directeur de la Transformation Digitale Groupe, Membre du Comité Exécutif

Soren Hagh | Heineken | Executive Director Global Marketing

Albert Asséraf | JCDecaux | Directeur Général Stratégie, Études et Marketing France

Sébastien Hua | Kering | Directeur e-Commerce et Omnicanal

Nathalie Balla | La Redoute | Président-Directeur Général

Fabien Sfez | Lagardère Active | Directeur Général du Développement Numérique et Technologique

Stéphane Mariotto | Le Duff | DSI Groupe

Romain Liberge | MAIF | Chief Digital Officer

Guillaume Sarkozy | Malakoff Médéric | Délégué Général

Hicham Badreddine | Malakoff Médéric | Chief Digital Officer, Membre du Comité de Direction

Jean-Noël Pénichon | McDonald’s | Vice Président Technologies, en charge du Digital et des Systèmes d’Information

Arnaud Deschamps | Nespresso France | Directeur Général , Membre du Comité de Direction

Samuel Baroukh | Nestlé France | Head of e-Business

Thibault Gossé | Numericable SFR | Head of e-Commerce

Patrice Slupowski | Orange | Vice Président Digital Innovation

Stéphanie Çabale | Orange | Vice Présidente Digital Marketing

Guillaume Oreckin | Pacifica | Directeur Général Adjoint

Antonia McCahon | Pernod Ricard | Global Digital Acceleration Director

Christophe Leray | PMU | Directeur des Opérations et des SI

Tom Brady | SABMiller | Group Head Of Digital

Gael de Talhouet | SCA | Vice Président Digital Transformation

Yves Tyrode | SNCF | Directeur du Digital Membre du Comité Exécutif

Barbara Dalibard | SNCF Voyageurs | Directrice Générale

Séverin Cabannes | Société Générale | Directeur Général Délégué

Jean-Pierre Remy | SoLocal Group | Directeur Général

Roland Harste | Swarovski | Senior Vice President Marketing

Thomas Nielsen | Tesco | Chief Digital Officer

Marc Gigon | Total | Vice Président Digital Marketing & Services

Thierry Elkaim | Transdev | Directeur de la Transformation Digitale

Yann Leriche | Transdev | Directeur de la Performance, Membre du Comité Exécutif

Catherine Spindler | vente-privee.com | Chief Marketing Officer

Gilles de Richemond | VSC Technologies | Directeur Général

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Beyond pilot projects

TABLE OF CONTENTS

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INTRODUCTION p. 04

CHAPTER 1�: THE DIGITIZATION OF COMPANIES IN 2016: THE NEW RULES p. 07

1.1 Customer relationship, data and new players: the 3 battles for digital in 2016 p. 111.2 The level of digital disruption varies according to sectors p. 15

CHAPTER 2�: DESPITE MANY EXPERIMENTAL INITIATIVES, BOTH INTERNAL AND EXTERNAL, COMPANIES ARE STILL LAGGING BEHIND PURE PLAYS AND CUSTOMER EXPECTATIONS p. 30

2.1 Faced with market standards set by pure plays, companies adapt by redoubling initiatives p. 342.2 Inertial forces still hinder traditional companies' scale-ups and their digital innovation is

less advanced than pure plays and customer expectations p. 40

CHAPTER 3�: BEST PRACTICES FOR ACCELERATING SCALE-UPS p. 45

3.1 Accelerationg scale-up, the IBM approach p. 493.2 The Data-Driven Company, or the overall improvement in competitiveness thanks to internal

and external data p. 513.3 Digital IT: a more agile and fl exible IT architecture for surviving market change p. 543.4 Collaboration is a competitive lever: breaking internal silos and embracing open innovation p. 56

CHAPTER 4: TAKING THE MEASURE OF DIGITAL p. 60

4.1 The BCG approach: An analytic framework for guiding transformation p. 644.2 A new chart of skills and job roles p. 664.3 More agile governance to transform the company p. 70

p. 73CONCLUSION

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CONTRIBUTORS p. 75ABOUT EBG p. 79ABOUT BCG p. 81ABOUT IBM p. 83

INTRO-DUC-TION

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THE DIGITAL MARKET, A MODEL FOR THE ECONOMY AT LARGE.�

he explosion of the internet bubble in 2001 seemslike a distant memory: since then, the digital eco-nomy has seen unprecedented growth and seems

to be immune to the crisis. In 2015, 83% of European households had access to high-speed internet and 90% of French under-35's owned a smartphone. We have also seen an explosion in the number of connected devices per person: the amount of French people using a mini-mum of 3 devices rose by 25% in 2015. This has direct-ly resulted in an unparalleled abundance of equipment and ecommerce is going mobile, with the boon of in-creasingly connected consumers. In Europe, 3G mobile networks now have a 90% coverage rate.

E-CONSUMERS MORE ANDMORE ON THE MOVE

Online mobile usage is skyrocketing. Online sales from smartphones and tablets in France, which accounts

for 6 billion Euros or 10% of national online sales, rose by 29% in 2015. This growth is greater than the total French online sales market, which saw a 14.3% rise in the same period! In 2015, almost 47% of French people connected to the internet with the same frequency on their smartphone as their computer, against only 37%

in 2014. This fi gure should continue to grow, given the potential of connected devices. Geo-localized mobile devices make new local services possible: home food delivery (AlloResto, TakeEatEasy), taxi/VTC hire.....

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The connected customer no longer simply buys pro-ducts, but increasingly exchanges services across plat-forms. These services, following the Uber model, can provoke polemics by disintermediating entire sectors

of the economy. "Disintermediation": the word signifi es great upheavals for certain long-standing professions, but also promises great opportunities with the radical

reconfi guration of the economic landscape.

FROM TRANSFORMATION TO DIGITAL REINVENTION

The range of disruptions at work creates untold new business opportunities, for the keen eyes who can seize them. "We can view digital as a threat, because it upsets the established model and can weaken traditional powers in the market", explains Séverin Cabannes, Chief Opera-ting Offi cer of Société Générale. "However, it is primarily an opportunity, which we welcome openly today".

And there are plenty of opportunities: today, digital accounts for 5% of GDP in France, and 6% on average, in OECD countries. European countries can expect to see a 2.1% rise in their GDP as a result of the digital economy. Digital is paving the way for new levers of growth. Big Data helps to customize off ers and services, enabling greater proximity with the end customer. As the Internet of Things creates new levels of interactivity, they pave the way for new business models. These changes directly impact traditional players. Should the old guard choose to perish or simply surrender? There is another choice: "Disrupt yourself, or be disrupted", warned John Cham-bers, then CEO of Cisco in 2015.

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Digital Reinvention 2016 - Introduction

METHODOLOGY OF THE GUIDE�

hat is the situational analysis of the digital transformation of the economy in 2016?

Prepared by the EBG in collaboration with the Bos-ton Consulting Group and IBM, the 2016 Guide answers this question by drawing on 65 interviews with top de-cision-makers (Chief Executive Offi cers, Chief Digital Offi cers, Chief Operating Offi cers, etc.) of French and international companies, including traditional, but also pure plays.

The areas of activity have been arranged into 5 groups: • Transport, Travel and Hotels,• Telecom, Media, Energy, Gaming,• Fashion, Distribution and Consumer Goods,• Insurance,• Banking.

By surveying these diff erent B2C or B2B2C sectors, amore global image of digital industrialization emerges, beyond pilot programs. Several analytic tools used by the Boston Consulting Group were applied to the ana-lyses of this work:

The matrix of the digital disruption of the BCG eco-nomic environment allows us to evaluate the intensity of the disruption that aff ects these diff erent sectors and their level of transformation.

This is supplemented by zooming in on the sectors with BCG experts and examining the intensity of the 5 disruptive forces: legislation, technology, the rising power of data, changing customer behaviour and ultima-tely new business models.

The Guide also calls upon fi gures taken from IBM's "Digital Reinvention" study, an investigation into 1100 executives across 15 countries, as well as analyses taken from the recent C-Suite Study, published in late 2015.

This study, which draws on over 5000 interviews across 70 countries, reveals insights from the viewpoint of 6 principal activities in 18 diff erent sectors, with spe-cial emphasis on the digital transformation they must undertake.

IBM identifi es 4 key factors to understand this "sca-ling up":

-platforms,-co-creation,-delivery,-change management.

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Digital Reinvention 2016 - Introduction

CH AP-TER 1

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CHAPTER 1�: THE DIGITIZATION OF COMPANIES IN 2016 : THE NEW RULES

1.1 Customer relationship, data and new players: The 3 battles for Digital in 2016

P. 09

p. 11

1.1.1 Consumer relationships upset by new channels of communication and distribution p. 111.1.2 Data leads to a tenfold increase in a company’s competitiveness p. 121.1.3 Services and products disrupted by GAFA and new entrants p. 13

1.2 The Level of Digital Disruption Varies According to Sectors p. 15

1.2.1 The 5 criteria for the digitization of a sector: data, legal and regulatory, new customer behavior, new entrants. p. 15

1.2.2 The transportation and hotel sectors : Victims of disruption p. 161.2.3 Telecom, Media, Energy, Gaming Sectors:

Technological progress is breaking established models p. 191.2.4 Fashion, Retail and Consumer Products sectors:

A comparative lull, but for how long? p. 211.2.5 Insurance Sector : When regulatory inertia maintains disruption p. 251.2.6 Banking Sector : A sector that remains protected from regulation p. 27

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Not all companies will die, but they were all hit. What does digital ul-timately mean: is it a complete cataclysm or the perfect opportunity for reinvention? In an economy undergoing complete digital transforma-tion, the rules have changed through relentless technological advances, the growing power of online sales, increasing competitive threats from 100% digital new players… Flung into the great ocean of digital, the acti-vities of all sectors are being re-confi gured at breakneck pace, and must adapt to consumers whose practices and expectations have changed. Some common trends emerge, such as omnichannel, which help to sim-plify the customer experience, while Big Data opens the way for per-sonalized off ers. The functional economy also encourages companies to move from selling products to selling services. The development of platforms also helps to combat disintermediation. The quality of cus-tomer relations and satisfaction has now become a crucial issue. That said, not all economic sectors are aff ected to the same degree.

01.

The digitization of companiesin 2016: the new rules

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1.1.1 - Consumer relationships upset by new channels of communication and distribution

ith the advent of online trading, purchasing practices have changed dramatically. Bet-ter equipped and better connected, today’s

customers are overloaded with information. For 56% of customers the internet is the primary source of pre-pur-chase information. Information outlets are multiplying, through blogs and social networks, but most important-ly aggregators and online comparison tools, that make exhaustive comparisons possible at the click of a mouse. Online reputation has become the critical issue for companies!

THE RISE OF MOBILE

Parallel to this evolution - or revolution- purchasing practices and customer interaction channels have ex-panded with the unstoppable rise of mobile. 40% of Euro-pean traffi c measured on ecommerce sites already comes

from mobile devices. 90% of mobile users now stay wit-hin a meter of their phone 100% of the time. Applications are booming. 46% of French people used them in 2015, against just 22% in 2011. Web retailers must adapt to this change, or risk losing their market share. "We see more and more customers starting their journey on a mo-bile device," says Thomas Nielsen, Chief Digital Offi cer of the British supermarket group Tesco. For technical teams, the challenge is to respond to customer needs in a uniform way, across each of their connected devices.

OMNICHANNEL: THE BEST OF BOTH WORLDS

Omnichannel and cross-channel refer to a revolution in the customer relationship, in both the physical and digital domains. Multi-channel orders had previously been possible (for example both on the internet and in store), but without the ability to move between them in mid-stream. Omnichannel now allows for seamless transitions between the real and virtual worlds, while taking advantage of all existing channels for commu-nication and distribution. This might seem a dizzying prospect, but companies are on the right track: this ap-proach has considerable potential for sales growth. " 45% of fnac.com sales were realized through multichannel in France (Q1 2015) ," confi rms Katia Hersard, FNAC Global Chief Ecommerce & Marketing Offi cer, leading culture superstore .

THE DIGITAL WAVE ALSO IMPACTSTHE PHYSICAL NETWORK

It seems that the irrepressible advance of digital is transcending its conventional channels, and the envi-ronment is now a cross-cut of the world of atoms and the world of bytes. Digital enriches, without being a substi-tute for, the physical relationship, as vendors and consul-tants are just as connected as their clients.

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1.1 - Customer relationship, data and new players: The 3 battles for Digital in 2016

Confronted by the digital tidal wave, companies have the same reaction. Whatever their industries, they face three common challenges: the reinvention of the cus-tomer relationship, the data revolution, and fi nally, the invasion of new entrants. The balance of power is shif-ting and GAFA (Google, Apple, Facebook, Amazon) are emerging as winners today.

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Digital Reinvention 2016 - 1. The Digitization of companies in 2016: The New Rules

CLICK AND COLLECT, A WINNING COMBINATION

For the companies who combine traditional store-fronts with ecommerce or online customer relations, physical proximity plays a key role. "Click and Collect", i.e. the pickup of orders made online, is becoming increa-singly popular, especially in cities. But this model stillwidely coexists with physical shops. " Click and Collectaccounted for 64% of our web sales on Christmas Eve,"said Christian Lou, Director of Marketing and Digitiza-tion at furniture store Darty, .

1.1.2 - Data leads to a tenfold increase in a company’s competitiveness

oday customer data is the lifeblood of a company. Storing and updating customer knowledge withtools such as CRM is becoming a crucial matter.

This means having the broadest possible vision of cus-tomers and their identities. This also means understan-ding their preferences, as a function of the market rela-tionship. CRM data also proves to be particularly useful in improving the customer relationship.

THE CUSTOMER IS BECOMING A DATA ORIGINATOR

The consumer is now seen as a data generator, either through their digital footprint (namely navigation data) that provides information about their habits, or through the new trend of the Internet of Things. All of this infor-mation feeds the CRM and big data platforms and leads to more personalized off ers, using predictive algorithms. "Usage and behavior data feeds into our Big Data pro-grams and help us to better understand our customers

and their consumption environment and to customize their experience," recalls Stephanie Çabale, VP Digital Marketing at Orange.

THE RUSH FOR THE INTERNET OF THINGS

The technological explosion of the Internet of Things can be seen as a key to understanding customers or providing new services: for example, Darty’s Button that simplifi es after-sales service, or ERDF and Engie’s smart energy meters… “We can expect many visual fea-tures, to help with the management or optimization of consumption", explains enthusiastically Hervé-Mat-thieu Ricour, CEO France BtoC at Engie, leading E&U provider. The Internet of Things can bring many new advantages: “In insurance we are heading towards the implementation of a behavior bonus via the Internet of Things” outlined Philippe Poirot, Director of Digital Development, Transformation and Quality at BPCE, one of the leading retail bank in France.

THE DATA WAR

In an increasingly open environment, control of end customer knowledge becomes a strategic concern. This is especially true for producers and distributors, who cooperate to share data where they have mutually benefi cial opportunities. “As part of building trusted partnerships with suppliers, we also run joint trails with our CPG suppliers. For instance, we ran a trial experiment where we advertised for their brands on Facebook, but then customers click through to the Tesco website for order fulfi lment.”, reveals Thomas Nielsen, Chief Digital Offi cer at Tesco.

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keting, on the same budget”, extols Antonia McCahon, Global Digital Acceleration Director at Pernod Ricard.

1.1.3 - Services and products disrupted by GAFA and new entrants

he eff ervescence of the fl edgling Californian startups of the 2000s eventually gave way in2016 to a multipolar landscape dominated by

the 4 digital behemoths of Google, Apple, Facebook and Amazon, as well as a nebula of start-ups and pure plays. These sites profoundly infl uence the commercial expec-tations of consumers by off ering services that are faster, cheaper and often better than traditional players. “Ama-zon has set a very high standard for customer expe-rience in terms of ease of purchase and the tracking of orders and delivery”, notes Marc Gigon, VP Digital at Total. Big companies are not fooling themselves, and are looking to stand out through strategic partnerships with the two giants, in a win-win rationale. “We hope to learn from the best! We believe there is room for all”, argues Jérôme Hombourger, Group Deputy CEO Development & Strategy, Crédit Agricole Consumer Finance.

DISRUPTION: THE ENFANTS TERRIBLES

The arrival of new disruptors challenges the core bu-sinesses of traditional players. Even more than Google or Facebook, they are bringing about great changes in the economy: keeping physical assets to a minimum ( the ‘asset light’ model), pressure on the margins due to re-duced operational costs, the threat of disintermediation, (as illustrated by Uber, who have a high media profi le)...

Hugues Le Bret, founder and CEO of Compte Nickel developed a business model that reduces hidden costsfor the customer: “Our model removes what is unpleasant

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The collaboration of clients and suppliers primarily takes place in the absence of any risk of direct compe-tition. “Our business model only makes sense if the brands are in good health. Therefore, we do not see them as competitors, but as partners whose development should be helped”, explains Catherine Spindler, Marketing Director at Vente-Privée. Incidentally, it is often the company that conquers the distribution network that can best collect customer data.

FROM PRODUCT TO SERVICE, THE IMPORTANCE OF THE CUSTOMER EXPERIENCE

Consumption is an important element in the cur-rent transition towards a functional economy, with the advent of content streaming and the sharing economy. For today’s customers services are more important than products. For online operators, the customization of the customer experience brings high hopes. “With ‘best jukebox’ we should become the ultimate record store, which accompanies the user and guides their listening with the right algorithms”, notes Simon Baldeyrou, Chief Operating Offi cer at Deezer. Products have now become services, and companies follow this principle, according to the model ‘X as a service’.

THE ADVENT OF PROGRAMMATIC MARKETING

User data also provides the ability to target consu-mers with unprecedented precision: programmatic plat-forms allow businesses to automate the processes of buying and selling ad space, while avoiding media agen-cies, the traditional intermediaries between advertisers and ad departments. While this approach often requires expensive investment, including the establishment of a Data Management Platform (DMP), the solution is pro-mising: “Overall, we are now 30-40% more effi cient last year since the implementation of programmatic mar-

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very fragmented, due to the diversity of national laws. For transnational players, it's a nightmare to face such regulatory complexity. "

On the other hand, new entrants can take advantage of an unequal balance of power to forge stronger links with business partners, who sometimes baulk at the all-power-ful GAFA: "Record companies have an incentive to en-courage a multitude of players, especially pure plays such as Deezer", explains Simon Baldeyrou, Chief Ope-rating Offi cer of Deezer.

for the customer, such as the cost of bank charges, since writes are actually recorded in real time on the account and overdrafts are therefore impossible. However, if there are no charge slip-ups, there is therefore no li-tigation and collection costs or risks in performance.” Limiting the costs associated with intermediaries also allows them to increase competitiveness. "Our service charges are quite low: 3% for the host, and 6-12% for the guest, meaning an average commission of 12%”, de-tailed Nicolas Ferrary, Country Manager France and Belgium at Airbnb.

AN OPEN ROAD FOR DISINTERMEDIATION

Facing upheavals in terms of distribution as well as customer relations, the value chain is inevitably being reconfi gured: clearing the way for disintermediation. What salvation exists for traditional players in these conditions? By contrast, certain companies are seeking to integrate their value chain. Arnaud Deschamps, Pre-sident of Nespresso France, expands on this philosophy : “We are one of the rare companies in this sector to control its entire value chain, with very strong ver-tical integration! At one extreme, we sent 300 agro-nomists to live on site with coff ee farmers, and at the other end, we organize the distribution ourselves”. By contrast, market places are generated by relying on in-termediation, placing themselves between the customer and a wholesaler, ensuring profi tability by commission charges.

AN UNEQUAL BALANCE OF POWER

However, certain sectors are less exposed than others, being protected by local market regulations, which complicates their access to international players. Christophe Leray, CIO & Head of Operations at PMU, describes the situation: “The market for gambling is

Boston Consulting GroupNicolas HarléSenior Partner

«Digital channels are growing very rapidly and have become the 'primary' channel for customer relations; tra-ditional channels (stores, call centers ...) have now beco-me 'secondary'."

Zoom on BCG

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1.2.1 - The 5 criteria for the digitiza-tion of a sector: data, legal and regu-latory, new customer behavior, new entrants

or a better understanding of sectoral develop-ments, BCG experts developed a matrix to ex-plore the level of disruption in each sector of

activity and the intensity of their transformation. These developments are considered in a historical perspective, from 2010 to a vision for 2020.

These changes must be placed in a broader economic perspective. The value creation per sector can be exa-mined via the Total Shareholder Return (TSR), which combines the value of shares and dividends paid on an annualized basis. The changes in TSR of European com-panies from 2005 to 2016 show that the diff erent sectors - outside of insurance, exist in a context of value destruc-tion.

The guide will continue with a close-up on each sec-tor, via the examination of the 5 driving forces that aff ect companies and their economic environment. BCG ex-perts have calculated the intensity of each of these forces on a scale of 1 to 5.

• First of all is technological advances, which bring aboutvarying degrees of digital adoption, between new en-trants and historical players.

• The data revolution involves a second pattern of disrup-tion, with unprecedented growth in trading volumes,but an inconsistent level of uptake by companies. Newbusiness models are now emerging, driven by data toboost their competitiveness.

• The third force is the appearance of new business mo-dels: the renting economy, payment upon usage, returnto the ecosystem, subscriptions, marketplaces, ‘on de-mand’, and even freemium...all of these exact pressureon the margins.

• The change in consumption habits is a fourth pressingfactor: customers today mainly turn to digital wheninteracting with companies, the majority of whom arenow shifting from a product driven model to a servicesoriented one.

• Finally, legal and regulatory circumstances also aff ectthe economic models that exist across sectors: barriersto entry, license costs, regulation of production me-thods, the distribution and delivery of products, etc.A score of 0/5 shows that the sector is protected bylegislation which hinders the arrival of new entrants.Conversely, a score of 5/5 indicates a less protective le-gislative environment.

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1.2 - The Level of Digital Disruption Varies According to Sectors

Legislation, new usages, technological innovation, and the boom of collection and processing of data ... not to mention new business models, there are many unsett-ling elements that profoundly challenge traditional bu-siness models. However, even though all sectors are af-fected by the digital wave, there is a diff erence in degree.

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1.2.2 - The travel and transportation industry: victims of disruption

he travel and transportation industry is the most severely impacted by the disruptions sus-tained in recent years in their respective eco-

nomic environments. They are expected to continue on this same trajectory during the next fi ve years. The main factors behind the disruption sustained by these sectors are pressure from the margins, the data revolution and technological developments.

The fi erce competition of online travel agencies (OTA) brought about the creation of aggregators. By referencing hotel and airline companies, these aggregators allow the consumer to fi nd the best prices and book their journey without going through traditional intermediaries. Mar-gins have been severely reduced since these players, by increasing transparency, have managed to lower sales prices while having a destructive eff ect on revenues (the

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removal of traditional intermediary costs such as reservation charges) and cultivating a more loyal customer. This trend is expected to continue to grow as these platforms advance rapidly. Some of these aggregators, such as Rome2Rio, off er ‘door to door’ services, which allow the user to book fl ights, public transport and even taxis, all from the same site. Traditional players are not sitting on their laurels, and some are developing services which connect transportation, the hotel sector and customers: “One of our innovation programs fo-cuses on door to door, via the integration of new digital business models in the traveller’s route”, explains Barbara Dalibard, former CEO of SNCF Voyageurs. “Our fi rst project was the integration of passenger information from end-to-end and in real time, thanks to a dedicated platform. We are now focused on a passenger’s fi nal kilome-ters to reach their destination, via multiple mo-des of transport (bus, bicycle, taxi) and with our partners”.

Model Definition Distribution Factor Examples

Ecosystem

Subscription

Freemium

On demand

Marketplace

E-sharing / Location Economy

Give to the user temporary ownership of a product without asking them to buy it

The profit is created by the sharing economy Intermediary costs are reduced or cut thanks to the connection between the tenant and the ownerFirms don't have to have invest in products nor to own stocks

Consumers products, services and datas interact and are interdependant

Consumers fidelity to the brand dimishes and the transfer costs are reducedCross sells are made easier Firms become the reference for users in many fields

The consumer pays a regular amount to access the product / service

Cash-flows uncertainty and advance are reduced by new flows of constant revenuesConsumers fidelity grows Subscriptions revenues can exceed those of a traditional unique purchase

The basic service is offered for free with paying options

Free offers allow to attract consummer fast Clients who do not pay produce datas and comments Trying the brand can be promoted to new consumers

The basic service is offered for free with paying add-ons

Free offers allow to attract consummer fast Clients who do not pay produce datas and comments Trying the brand can be promoted to new consumers

A plateform that connects products/services sallers to buyers

The firm has an unlimited potential of offer of products and services Inventories are not needed anymore The firm can make the sellers pay for the extra charges in exchange of supplementary services

16


BlaBlaCarFrédéric MazzellaCEO and Founder

«A car costs on average 5000 to 6000 Euros to maintain per year in France. With a fleet of 38 million vehicles in France, this amounts to 200 billion Euros per year, around 10% of GDP in France. As we know, these vehicles spend an ave-rage of 96% of the time idling, 0.5% in traffic jams, 0.8% more looking for a par-king spot, leaving only 2.7% of the time where the vehicle actively drives to its destination. In 3 out of 4 cases the driver is the only person in the car. If we were a transportation operator, it would be uni-maginable to maintain such an underuti-lized fleet! »

Interview TECHNOLOGICAL CHANGE IS THE SECOND MOST IMPORTANT FACTOR

FOR THE TRAVEL AND TRANSPORTATION INDUSTRY, AFTER THE ECONOMIC

FACTOR, OVER THE NEXT THREE YEARS.

Technologically, the emergence of peer to peer sha-ring platforms has caused a rupture in business models, by shattering the barriers to market entry related to pre-viously prohibitory costs. Freed from these constraints, and benefi ting from weak regulation, new ‘asset light’ players like Blablacar, Uber and Airbnb are rushing into the breach, bringing copycats like Wimdu or 9Flats in their wake. They all contribute to cutting prices in the markets they enter, and inspire fi erce loyalty in their users. In 2015, Blablacar had a total of 20 million members, and Airbnb received a market valuation of 24 billion dollars! Traditional players are attempting to counter the off ensive by buying OTA competitors and taking advantage of innovations in technology and the collection of data, to improve and simplify the customer experience. The Internet of Things should also greatly be-nefi t the sector. A growing ability to control costs, thanks

17


to the availability of real time information, is key. SNCF hopes to develop sensors to improve maintenance in its industrial sector. “We can even cross cut the sensors”, evokes Yves Tyrode, Chief Digital Offi cer at SNCF. “For example we could place sensors on infrastructure to measure equipment wear, and vice-versa with accele-rometers and cameras set up along rail tracks...”

The growing availability of all kinds of data has brought about signifi cant changes. Companies now need to track feedback that occurs on the web (analysis of opinions voiced on social media, online marketing etc.) in order to complement their customer knowledge, with the ultimate ambition of 360° coverage. Diff erent players can now exchange data with each other. This can lead to consolidation, ‘plug & play’ services and using tertiary or even in-house APIs. Nevertheless, caution must be exer-cised!

The massifi cation of the culture of reviews and online experience feedback led to a drastic increase in customer demands, making it a double-edged phenomenon. If ne-gative opinions propagate on the internet turnover can go into freefall! This is true to such a degree that the fee-dback economy is considered one of the most important evolutions in the hotel sector by Vivek Badrinath, De-puty CEO in charge of Marketing, Digital, Distribution and IT at AccorHotels. “Digital particularly impacts the hotel sector through the feedback economy and on-line opinions, namely via players such as TripAdvisor, Booking.com or social networks.”

Legislation has favored the appearance of new en-trants. However, it hinders a total disruption of the sector by leaning on the accessibility of procurement contract data, and the protection of personal data by regulatory authorities still inhibits the enthusiasm of disruptors ... although bypasses to value creation do exist. “I believe

T he telecom, media, energy and gaming sectors have seen big changes in recent years, changes that are expected to continue. Although the role

to be played by personal data as well as new customer demands are considerable, it is technology and the impe-rative to remain competitive which will bring the biggest upheavals. Traditional media have been totally disrup-ted by the digital wave. Their margins have been da-maged by the advent of real-time free information, co-ming from social networks and blogs. They are also feeling the full force of pure play competitors like the Huffi ngton Post, who have found a genuine economic ad-vantage by using a voluntary contribution model. Media publications must also face more and more low cost com-petitors such as NextRadioTv, who have digitized all of their channels (TV, radio, internet) in order to expand their audience and increase advertising revenue by mul-tiplying on-demand users.

in a general openness of data, and in its reusabi-lity by third parties. If we decide not to make them open, they would be accessible for many through crowdsourcing”, puts in perspective Yann Leriche, Chief Performance Offi cer at Transdev. Th e au -thorities are increasingly worried to see these new players impacting employment fi gures and their tax revenues by competing with traditional players. In April, Berlin struck out against online housing plat-forms (with Airbnb as the fi gurehead) by introdu-cing mandatory district council permits for apart-ment renting, and by banning the rental of more than 50% of the surface area of housing available on the rental market via these platforms.

1.2.3 - Telecom, Media, Energy, Gaming sectors: Technological progress is breaking established models

19


For the telecom sector, the shock was no less violent. The preponderance of free and freemium services (Skype calls, Whatsapp and others) greatly reduces margins at the same time as they are incurring large infrastructu-ral expenses to move to 4G and 5G. “The telecommu-nications operator business is undergoing great tech-nological changes, in particular with 4G high speed networks and fi bre, which allow the ever increasing consumption of content”, commented Thibault Gosse, Head of eCommerce at Numericable SFR .

And what about the gaming industry? Despite na-tional monopolies, the internet has allowed the break-through of new competitors from abroad. “In the online gaming world we have ten competitors! While in terms of the physical world we are the only company in the market”, observed Stéphane Pallez, President & CEO of La Française des Jeux: It is therefore in our best in-terests to avoid a wholesale migration of our physical customers towards the online world, to avoid the risk of them moving to our competitors”.

Christophe Leray, CIO of PMU explains that he also believes in digitization… but at the point of sale: “A cus-tomer told me one day that he didn’t play on the inter-net, because it would be like drinking alone. Even in a digital universe, our goal remains to bring the consu-mer into a community sale point. Digital allows for paperless programs, including the preparation of bets in advance by smartphone.”

The energy sector is also undergoing incremental changes, even if they are not as radical as those happe-ning in media and telecom. The arrival of new techno-logies such as electronic meters (the ERDF Linky meter being the most well known) will no doubt change clients’ habits and allow companies to customize their off er. But the technologies that lead to savings on platforms can

On top of this structural challenge, there is a pro-blem which strikes the very profession of journalists, who must totally refocus on articles suited to web usage. In some cases media outlets put paywalls in place on their websites. The ideal economic model for online media has yet to be found but should stabilize in the next 5 years. One thing is certain: publications had to overhaul their work practices to showcase their digi-tal output. “Between the working rhythm of the Paris Match weekly publication, based around typesetting once a week, and online media like ParisMatch.com which publishes in real time, the economic model of journalism has completely changed”, analyzes Fabien Sfez, Managing Director of Digital Development and Technology at Lardère Active. All the more given that the digitization of content leads to the convergence of our diff erent media; radio, video, blogs and they some-times fi nd themselves in competition with each other.”

19


also indirectly aff ect the traditional value chain of ener-gy players. “The classical model of the service station is today being attacked head on by companies such as Drop don’t park (a car valet service which parks and takes care of your car), or Purple, in the USA (home delivery of gasoline)”, illustrates Marc Gigon, VP Di-gital Marketing & Services at Total “These startups have taken a position close to our business models, and could one day threaten them”.

The electricity market seems, however, to be protec-ted from new entrants: “There are almost no interme-diaries in the electricity market in Europe, with the exception of the United Kingdom”, explains François Gonczi, Digital Director, EDF Commerce. “In eff ect, margins are low, and rates relatively close between competitors. The cost structure therefore keeps us safe: I do not see how an intermediary could be profi -table under such conditions. The consequence is that winning new customers does not happen in a price war, but by the quality of associated services and customer relations.”

The collection of data from the Internet of Things or navigation devices leads to increased operational per-formance. A/B testing, which allows for live comparison of web features, is replacing traditional marketing tests. “SFR traditionally performed several customer tests before putting a new customer web service online”, de-tails Thibault Gossé, Head of eCommerce at Numeri-cable SFR. “But their profi les (students, unemployed…) didn’t always match our targets, which were more family orientated. This is why we have decided to in-tensify our eff orts with A/B testing and live customer tests.”

The data captured by smart meters, for example, should also lead to better targeting of consumers, to ad-just the value proposition. “The fi nal stage, on the ho-rizon for 2016 or 2017, is to give the technician every means, at the end of his call-out, to promote a fi tting product for the customer”, foresees Hervé-Matthieu Ricour, CEO France BtoC at Engie. “Between then and now, we will be able to establish - using data cross refe-rencing- the services a customer uses, especially those which they have not yet availed of, but which would be a useful complement.”

In these sectors as elsewhere, the consumer is smit-ten with the great hope of digital tools, and expects to be able to consume media (or connect to their own platform) on every possible device (tablet, computer, mobile…). “The web is a fundamental pillar of our client acquisi-tion strategy and also allows easier access to support services for our customers”, continues Hervé-Matthieu Ricour, CEO France BtoC at Engie. The demand for real time activity also greatly aff e cts c ustomer relations. I n the media sector, the dynamic of commentary from on-line readers has also created the necessity for modera-tion, and the possibility of a new form of customer enga-gement.

It must be noted however, that the media, telecom and gaming sectors are seeing a growing convergence of their platforms and content. Thibault Gossé, Head of eCommerce at Numéricable SFR explains : “We are in the process of creating a range of products for multi-channel distribution, through our VOD package, which allows us to promote series produced within the group. This logic does not stop at production, but will also incorporate partnerships, particularly the retransmission of spor-ting events”. Thus in reality, the services provided by the operator “will be closer to Canal+, rather than traditional competitors like Orange or Free.”

20


T he retail, consumer products and fashion sec-tors have been greatly impacted by the break-through of marketplaces like Amazon, who have

set new standards for customers. That said, technologi-cal pressure is less fi erce than in other sectors and a data revolution is underway, which could allow diff erent players to win out, if they take advantage of new consumption habits. This is taking place in a favorable environment for these sectors, who have achieved more value creation since 2006 compared to the other sectors examined.

New customer usages leads to an expansion in avai-lable data, through assessments and ratings made on so-cial networks or specialized sites. This information can help companies to predict demand, or to simply manage their online reputation better. It is therefore no wonder that data collection has become a key issue for all players

in these sectors. This has consequences for the economic landscape, as companies are no longer hesitating to buy smaller players, who are holders of interesting data.

In 2015, the sports clothing brand Under Armour ac-quired the nutrition and physical exercise platforms of MyFitnessPal (120 million users) and Endomondo (80 million), which allows them to utilize a much larger pros-pect base and target customers better. In some cases, it is the retailers themselves who partner with suppliers in order to share customer knowledge. “We provide our suppliers with a set of tools, which help them to know how their products are performing in store. They can then perform their own analytics in order to unders-tand which campaigns and/or products are the most ef-fective, and where”, comments Thomas Nielsen, Chief Digital Officer at Tesco.

Legal issues ultimately act as both an accelerator and a brake in these sectors. They slow down the transforma-tion of markets, notably through the licenses accorded by regulators for media and telecom players. But some-times they also prevent them from seizing new opportu-nities. “"We have a commitment to responsible gaming, which involves a non-intensive model, which means that our only means of growth is to enlarge our customer base: we cannot intensify certain segments, that would contradict our ethical commitment” explains Stéphane Pallez, President and CEO of La Française des Jeux. “As much as certain companies choose a strategy that seeks to increase the average ticket size, we cannot do this.”

1.2.4 - Fashion, Retail and Consumer Products sectors: A comparative lull, but for how long?

21


IBM FranceRémi Lassiaille Managing Director SNCF

Traditional players in the travel and transportation sectors have seen competitors emerge from sectors of activity which are sometimes diametrically opposed to their own. These disruptors also bring with them new technologies, new business models and innovative or-ganization. Particularly, they introduce sales tools and methods specially adapted to the ‘increasingly digital behavior patterns’ of end customers. Moreover, the In-ternet of Things will bring an improvement in the quality of services and considerable gains in productivity, which prove indispensable in this ‘disruptive’ period. The acti-vity in these sectors generates a great deal of data which must be utilized in the optimal manner. The challenge for these companies is to integrate the necessary tools for the gathering of data and its analysis, to then find their place within traditional industrial processes and infor-mation systems. To transform rapidly, profound changes that put digital at the core of the company, are vital.

Expert Opinion

The 3 disruption trends observed in the telecom sector: • The seizing of power by users• The explosion of mobile data usage• A strong trend towards the concentra-

tion of the market to a limited numberof very powerful players

The IBM Zoom

Lagardère ActiveFabien Sfèz Managing Director of Digital Development and Technology

«We recently won a call for tender from Nice airport. We are leveraging our ex-perience in real time targeted mobile ad-vertising, which was initially developed for our sites. This allows us to reach connected customers in the airport, with relevant ads from businesses, in Engli-sh, as 50% of Nice airport purchases are made by foreign visitors..»

Interview

22


Inevitably, the digitization of sectors also puts pres-sure on the margins, since new players are appearing, who attack the market shares of traditional players. Dollar Shave Club, an American company which offers home delivered razors and other beauty products on a subscription basis, with an entry level plan of one dollar per month, has received a market valuation of 615 mil-lion dollars.

IBM FranceLionel Vidart Telecommunications Leader

The problems faced by companies in the telecom sector are exciting, because they are being forced to launch new digital services very quickly and this leads to a growing demand for end customers. Operators are therefore caught in the inescapable dynamic of a forced march towards digital transformation. Furthermore, the improvement of the customer experience through digital is certainly a strategic priority for companies in this sec-tor, whether this means client acquisition or improving existing customer loyalty. The challenge for operators also lies in the utilization of the huge amounts of data generated by all objects which are part of the Internet of Things, to create new sources of revenue. They must also measure and manage the quality of the service ex-perience by their customers, analyzed via the network and the information provided by apps and device usage. This can help improve customer satisfaction and loyalty.

Expert OpinionIn fashion and especially luxury goods, data proces-sing from diverse sources has an even more paradoxi-cal effect: “Big Data allows us to reintroduce customer knowledge and therefore personalization, into what has become a global industry that can no longer know its customers individually, without the aid of techno-logy”, explains Sébastien Hua, eCommerce & Omni-channel Director at Kering. “So it is more like a return to our roots than a real departure.”

As is the case in other sectors, consumption prac-tices have profoundly changed with the digital wave. More aware and demanding customers trust crowd-sourcing rather than expert opinions, and prefer to consult online reviews before buying a product, instead of listening to salespeople. They also follow more and more complex sales paths which mix online and offline activity. 45% of consumers now prefer to grocery shop online instead of in physical stores. (Source IBM).

“Click and collect” is the figurehead of this move-ment for a complete overhaul of the supply chain, which will develop in relation to different sales and distribu-tion activities. “In the DIY industry, there is no point in emulating the click and collect models of agri-food brands”, remarks Christophe Verley, Chief Digital Officer at Adeo. “Our challenges are very different: in the food industry, the consumer seeks to avoid ha-ving to enter a store. In DIY, however, clients often come from far away to ensure the availability of pro-ducts when they visit, and to then complete their pur-chases upon entering the store”. It follows that there is pressure for delivery times to be reduced. “With new customers like Amazon, customer expectations are changing, with new implicit norms being established, for example in terms of delivery times and the choice of time slots for delivery”, believe Christian Lou and Yan Aubriet, Director of Direction Marketing & Digi-tization and Director of Digital Development at Darty.

23


Retailers have not been spared either, with the arri-val of giants like Alibaba and Amazon who, armed with a technological advantage, benefit from efficient logis-tics and low cost physical distribution, which leads to the shrinking of already weak margins. “The grocery market is a very competitive one, especially in the UK with everything from pure plays such as Amazon Fresh to the arrival of some discount competitors”, concedes Thomas Nielsen, Chief Digital Officer at Tesco.

As a result, traditional players have to review their supply chain from end to end in order to cut costs. They may not be safe yet. In the future competition may even come from suppliers themselves, who could be tempted to disintermediate their distributors, and take control of their customer relationships. Michael Aidan, Chief Digi-tal Officer at Danone, gives a nuanced word of warning : “We are experimenting with home delivery for Evian water bottles, but it is impossible for us to deliver to bu-sinesses such as bars or cafés.”

These sectors are ultimately prone to technologi-cal evolution. Thanks to online sales, sellers lean more and more on the theory of the long tail, to increase their sales. This means expanding their catalogue as far as possible by targeting less popular products, with an ex-panded catalogue making up for lower sales per item. The Internet of Things also contains a repository for in-novation, with the future development of smart kitchen equipment. “We could potentially see the advantage of forging partnerships with sellers of connected refrigera-tors”, imagines Florian Sauvin, Chief Digital Officer at Bel Group and Director of Unibel.

Between now and this futurist outlook, digi-tal showrooms are flourishing. “We created a 150m2 showroom to complement our digital sales channel”, reveals Nathalie Balla, Co-Owner & CEO of La Redoute. “For us it is a way to reinvent a new kind of physical store.

IBM FranceEmmanuel de Saint Leger Distribution Sector Leader

Of all the sectors, the retail sector was one of the har-dest hit by the wave of digital transformation. Compe-ting directly with online sales platforms and subject to a strong change in customer relationships, the big retail companies have seen their existing business models challenged by new consumer practices.

Faced with these challenges and their huge impact on business processes, the sector confronts three major problems : • The digitization of all or some of the activities of

companies in the sector, moving particularly towar-ds the installation of online sales platforms.

• The optimization of customer knowledge andpathway to ensure better customer relations.

• The establishment of integrated omnichannel andsupply chain management.

Expert Opinion

Physical sales are good, and the rate of web conversions is exploding in surrounding areas”. On the legal front, there are few changes however. The disparity between national regulations limits international competition. Nonetheless, by putting strict controls on stores’ ope-ning hours, legislators hand the advantage to online dis-tribution channels over physical retailers.

24


Boston Consulting GroupNicolas de BellefondsPartner at BCG

Mass consumption faces the risk of soft disruption

Immune to disruption until now, the mass consump-tion industry is making use of the growing opportuni-ties of the digital economy and is making up for lost time with accelerated transformation programs.

The battle is being waged on four fronts : • Transformation of marketing via earned media and

data, to reinforce brands and perform large scale tar-geted advertising

• Development of direct or indirect ecommerce, whichaccounts for 50% of growth at 5 years

• Digitization of operations to increase their efficacy• Innovation in services to move value proposition

towards the experiential

The difficulty lies in bringing about this change inhistorically decentralized and entrepreneurial cultures. Organizations that are slow to adapt risk facing a softer disruption, but this is not without danger. The relevance of their message can fade, publicity costs can increase and market shares in digital channels can be diluted.”

Expert Opinion1.2.5 - Insurance sector: When regula-tory inertia maintains disruption

T he insurance sector was until now protected from disruption by generally protective natio-nal legislations, which limit the number of new

entrants. However, the growing use of data and technolo-gical change suggest that profound transformations are on the way. Value creation in 2016 is two times lower than the S&P 500 average index. The situation is even more troubling than the growing use of data, and technologi-cal changes suggest that profound transformations are on the way.

The benefi t of new technologies to insurers is consi-derable : Big Data tends towards the automatization of processes and drastically reduces costs, opening the way for new models of customized off ers by capitalizing on the Internet of Things. “ The Internet of Things has the potential to measure the behavior of the insured more

25


accurately, and thus allow us to adjust our rates accor-dingly”, asserts Isabelle Moins, Head of Direct Activi-ties, Digital, Customer Marketing at Aviva.

“ We launched a behavioral auto insurance off er on Amaguiz, based on data collected from a unit connec-ted to the vehicle”, counters Thomas Vandeville, Di-rector of Group Digital Transformation at Groupama. “This model changes the rates for risks and leads to a mechanistic reduction in premiums”. A mutual benefi t: insurers optimize their risk while customers pay lower premiums. As a result, the combination of the IoT with Big Data should earn $14 billion for insurers over the next 10 years.

This promise should be tempered, because it implies a profound challenge to the insurer's economic model. “If the data is drawn directly from the insured’s environ-ment, we might not own this data in the future”, alerts Isabelle Moins, Head of Direct Activities, Digital, Cus-tomer Marketing at Aviva. Automobile manufacturers could choose to retain control of captured data: “The connected car will revolutionize the structure of the insurance market, giving more power to the manufac-turer who would be in an ideal position to utilize the data coming from vehicles”, warns Thomas Vandeville.

A REVOLUTION IN DISTRIBUTION FOR INSURERS

Parallel to this, customers are becoming more deman-ding and want to choose their mode of access (mobile, web, telephone, physical). Insurers must readjust as a re-sult. Carline Huslin, Head of Digital and Multichannel Customer Experience at Generali France, underlines this point: “The digital revolution also affects the dis-tribution mode: it is no longer the provider who decides what is proposed to the customer, it is the customer who chooses the product that they will be provided”.

Boston Consulting GroupNicolas HarléSenior Partner

Banks : changes are inevitable, faced with FinTech and new customer expec-tations

The digital transformation is one of the main challen-ges to banks experiencing difficult regulatory and eco-nomic conditions (negative interest rates). This is being forced by today’s customers, who use digital channels more intensively than ever. Nowadays, mobile applica-tions and the web are the main contact channels, ahead of traditional channels like the telephone or physical bank branches. GAFA have set the standard for cus-tomers and they have high expectations for the quality of their digital interaction with banks. Furthermore, banks now face multiform competition, friend-enemy, through the emergence of more than 8000 FinTech companies that have raised more than $75 billion since 2000, chiefly in venture capital.

To transform themselves banks must revamp their operational models, adapt their computer systems, en-sure the evolution of their competency models to adapt to digital, put in place ambitious data strategies, establi-sh FinTech ecosystems and weigh the opportunities to launch disruptive models.

Expert Opinion

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1.2.6 - Banking sector: A sector that re-mains protected from regulation

Pillars of the real economy, banks are underta-king digital transformation programs…but they are doing it in an environment of increasing re-

gulation, where their profi tability is at its lowest. Their value creation has since been signifi cantly lower than in other sectors, on a consistent basis. The trend may conti-nue as banks are not safe from radical modifi cations of their environment in the next 5 years. Even though they are both under pressure, but also protected from their competition by regulatory and license constraints, they must also deal with heavy technological changes and growing compliance costs for their systems. Technology is a window of opportunity for bankers, allowing them to reduce certain operational costs.

Today’s digital orientated consumers execute banking operations from their mobile devices (or more rarely their computers), which in the past would have required the medium of a physical teller. This even includes com-plex operations like mortgage applications. Banks who are at the forefront of digital can reduce their costs by a third.1 This source of savings can be up to $200 billion.2

But these technical changes are not always easy to put in place. The integration of new technology parallel to rigid, outmoded computer systems is a real challenge, even if banks have generally strong technical competen-cies. Much simpler evolutions nonetheless allow banks to deal with growing customer demands, as the ergono-mic features of interfaces are still open to much impro-vement. Less than 1% of traditional mobile banking app users would classify them as their favorite.1

Traditional banks are not missing this fact, and most are developing 100% digital versions of their services

Just like the air travel sector a few years earlier, the in-surance sector is dealing with strong marginal pressure from aggregators like LeLynx.fr. By acting as the first interface between customers and insurance companies, they are waging war at the margins, which clears the way for new players who interrupt the value chain and are free from certain traditional costs (namely rent and phy-sical employees). Nonetheless, not all entrants are pure plays: Ford garage owners now provide their own brand of auto-insurance and free themselves from the B2B ser-vices of traditional insurers. The diversification of ser-vices (insurers becoming bankers, or the reverse) leads to increased competition with banking players.

Historical players are transforming to stay in the race. AXA has implemented powerful digital governance and launched numerous pilot programs with business lines. Partnerships with startups, mainly Blablacar, are expec-ted to accelerate with their two innovation labs and their Strategic Venture. Groupama is also expanding strate-gic collaborations: they have established partnerships with Renault, to counter the disintermediation of auto-mobile insurance, and with Orange to place themselves in the payments market. Furthermore, the architecture of the company has been recast in the style of the Ama-guiz platform.

27


IBM France GBSVincent DaerdenLeading Banking and Insurance Sector

The players from the banking, finance and insurance sectors are faced with major challenges which can only be met with digital transformation. New usages by cus-tomers, the consolidation of commercial margins and ROE, reductions in structural costs...and regulatory pressure forces them to rethink their back office internal systems and put in place new technological tools.

To this end, the creation of online services, market infrastructure or new payment solutions are their future flagship projects. FinTechs are also establishing privile-ged partnerships with large groups for the formulation of their digital strategies. Lastly, they have embraced emerging technologies like AI or Blockchain, which are moving from the experimental phase towards industria-lization, with major financial rewards in sight.

Expert Opinion (for example Société Générale with Boursorama). The sec-tor also foresees the dawn of disruptive technologies like machine learning and blockchain, which will bring techni-co-economic upheavals for banks.

MOBILE WILL SOON OVERTAKE THE DESKTOP IN TERMS OF THE NUMBER OF

BANKING OPERATIONS PERFORMED ONLINE (32% FOR MOBILE THROUGH APPS,

AGAINST 37% FOR THE WEB IN 2015)

As well as dealing with technological advances, the banking sector must adapt to the arrival of new entrants. On the frontline are FinTech companies, with lighter cost structures, threatening traditional players who are already dealing with a historical decline in interest rates over se-veral years. FinTech are also in pursuit at each level of their value chain, threatening the sector with a phenome-non called ‘death by a thousand cuts’.

70% OF COMPLIANCE OFFICERS INTERVIEWED BY IBM EXPECT TO

SEE GROWING REGULATORY COMPLEXITY IN 2017

The work of banking establishments is further compli-cated by legal issues. The financial crisis, the fight against terrorism and money laundering, fiscal fraud... regulatory constraints on banks are becoming more and more expen-sive. And it’s not over, since 70% of compliance officers ex-pect to see growing regulatory complexity in 20171. Ano-ther heavy blow for banks: states are now forcing them to share their data with authorities, in order to open up the markets. “ Regulators chose to promote free competi-tion, by pushing open data or obligating us to make our customer account information accessible to third-party providers”, analyzes Philippe Poirot, Director Develop-ment Digital, Transformation & Quality at BPCE.

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An example of a banking disruptor: Compte Nickel

Founded in 2012, Compte Nickel offers a simple and in-novative instant payment service, which guarantees free-dom from overdraught and premium charges. With the support of strategic partners in the card payment sector (VISA, Mastercard, Gemalto) the startup has conquered a niche market of individuals who have been abandoned by banks and require a bank account number. They at-tract young people and even traditional bank customers, who are not afraid to try their services, while still keeping their standard account. They have achieved success with over 300,000 customers in May 2016, and 20,000 new ac-counts created per month.Compte Nickel now challenges traditional banks with their radical business model. While traditional players are suffering from high distribution costs, the startup has developed a partnership with tobac-co stores, which guarantees a broad territorial base and a mere 3€ customer acquisition cost. The fledgling company hopes to establish itself internationally by 2017-2018, and has ambitions of transforming itself into a banking plat-form by collaborating with FinTech players.

Compte Nickel is seeing real success thanks to its pro-mise of instant payments without hidden rates or charges, much like peer to peer payment and funding platforms between individuals. The threat is much more serious for banks than FinTech companies, who are present in niche markets, and are beginning to organize partnerships, like Number 26 and TransferWise. The next disinterme-diation will more than likely relate to mobile payments, which grew by 40% in 2015 and 2016, and are expected to reach over $1 billion between now and 2017.1 There are upheavals to come, to be sure, and even more so if GAFA take on the market, following the lead of Apple’s ApplePay.

Zoom on Compte Nickel

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CH AP- TER2

230

CHAPTER 02�: DESPITE MANY EXPERIMENTAL INITIATIVES, BOTH INTERNAL AND EXTER-NAL, COMPANIES ARE STILL LAGGING BEHIND PURE PLAYS AND CUSTOMER EXPECTATIONS

2.1 - Faced with market standards set by pure plays, companies adapt by redoubling initiatives

P. 32

p. 34

2.1.1 - Pure plays set the market standard p. 342.1.2 - Classical players begin their transformation with customer engagement p. 352.1.3 - Companies are learning to use data: increasing POCs and experimentation p. 362.1.4 - Companies innovate incrementally on products, services and processes p. 382.1.5 - Companies establish external innovation programs through venture capital,

accelerators and startup acquisitions p. 39

2.2 - Initial forces still hinder traditional companies' scale-ups and their digital innovation is less advanced than pure plays and customer expectations p. 40

2.2.1 - Obstacles to reaching scale p. 402.2.2 - Traditional players remain short of the digital innovation levels set by pure plays

and customer expectations p. 42

31

In 2016, digital transformation must no longer be limited to the superfi cial digitization of activities. Companies are catching on, which means redou-bling digital initiatives for customer relations and data. “We are convinced that more than the digitization of existing processes, the reinvention of business models is taking place”, posits Pascal Buff ard, President of CIGREF. There is, however, a big element which complicates things for esta-blished players: public expectations for ergonomics, ease of usage, diversity of services and reactivity, which come from the standards set by pure plays and other new entrants. The benchmark for digitization is set by companies from the digital revolution, who function like permanent innovation labs. Their successes become standards for the entire sector. This environment is inspiring digital renovations which aff ect individual companies as well as entire sectors of activity. Companies are especially open to new modes of innovation and are keeping a close eye on the best practices from other sectors. They are opening up to the ecosystem of startups who are one-stop shops for new technologies, new cultures and new working methods. Com-panies are spurred by economic urgency, and the potential to reduce their time-to-market by increasing synergies.

02.Despite many experimental initia-tives, both internal and external, companies are still lagging behind pure plays and customer expectations

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2.1 - FACED WITH MARKET STANDARDS SET BY PURE PLAYS, COMPANIES ADAPT BY REDOUBLING INITIATIVES

On the road to digital transformation, companies are expanding their initiatives, pursuing the belief that solu-tions are to be found externally. In the economic world, as elsewhere, there is strength in numbers.

2.1.1 - Pure Plays set the market stan-dard

onsumer quality expectations are set by pureplays. Services centred on digital know-howlimit time wastage, and provide an ergonomic

experience. They also provide the ability to customize and use customer interactions for evaluation and quality improvement. The gap between new market entrants and established players is sometimes so stark that, accor-

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ding to a study carried out by Fujitsu in May 2016, 20% of European consumers would be willing to use Google, Facebook or Amazon for banking services or insurance products. Two trends for pure plays emerge from this survey: they must reinvent themselves, but also capture new sources of growth by opening up new markets. It is therefore vital that traditional companies not allow too large a gulf to emerge between their most innovative competitors. This means staying in the race, with cus-tomers who care less about the core of the business and who their providers are, than the digital transformation of the consumer experience.

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Digital Reinvention 2016 - 2. Despite many experimental initiatives

the B2B model, the customer experience must remain the primary concern”, assures Magali Noé, Chief Digi-tal Offi cer at CNP Assurances.

This customer centric approach, with the customer as the focus of all concerns, is crucial in establishing a quality long-term relationship between a brand and its customers. This is also known as relationship marketing. “We also leveraged relationship marketing, through the creation of a consumer database. Because we need to understand our value chain, our consumers, how do they relate to the products we sell?”, describes Tom Brady, Group Head of Digital at SABMiller. This makes it possible to increase performance through commercial targeting. “We measure customer usage of the relation channels. This allows us to adapt our relationship mo-dels to meet our customer expectations”, pursues Phi-lippe Poirot.

MORE INTELLIGENT COMMUNICATION

In line with this trend, all traditional marketing func-tions are being digitized: “We didn’t want Bel to have digital marketing that was separate from traditional marketing, but simply marketing in a broad sense, in a digital world”, clarifi es Florian Sauvin, Chief Digital Offi cer at Bel. Although large campaigns based on un-diff erentiated advertising spots remain interesting for FMCG players, communication is becoming more subt-le. The focus is on social media buzz, in the wake of the 2015 recruitment campaign by Michel & Augustin, in the Paris metro. Thanks to data collection, advertising campaigns are becoming autonomous through program-matic marketing as well as becoming more personalized and effi cient. They are also opening the way for hybrid campaigns between digital and commercial promotions. Antonia McCahon, Global Digital Acceleration Direc-tor at Pernod Ricard, explains with an example : “We transformed one of our websites into a portal that re-directs consumers to partnering bars.” This approach

2.1.2 - Classical players begin their transformation with customer engagement

n a market led by new entrants, traditional players are reinventing customer engagementin order to stay in the race. The fi rst commercial

challenge involves making products and services avai-lable through online sales. Marketing is also following suit, by evolving into digital marketing: today’s media investments inevitably involve buying advertising space on Facebook, or keywords at Google… and follow diverse media policies according to devices (web, mobile…). “Our mobile related investments account for more than 25% of our total digital budget, which is much higher than the market average (around 17%)”, evokes Samuel Ba-roukh, Head of e-Business at Nestlé France.

Companies must now cover all traditional professions digitally, from sales to distribution, by way of media communication. “We already knew that networks were important: this was the fi rst step towards digital. So we already advertised the brand through online social media. The next step (a huge mind shift) was to take advantage of the online world for commercialization purposes too”, analyzes Roland Hartse, Senior Vice President Global marketing at Swarovski.

Today, people spend up to 11 hours a day consuming digital services, and screens play a central role in our li-ves. This is a new paradigm for advertisers, who need to review their marketing mix and adjust their sales strate-gies. “Today the customer can easily inform themselves on an autonomous basis, as well as question the infor-mation provided by bankers”, observes Philippe Poirot, Director Development Digital, Transformation & Qua-lity at BPCE. “Customer relations is becoming a colla-borative approach to creating solutions.” This concern is shared by many B2C players, but also B2Bs. “ Even in

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is a tool that meets the ultimate requirement of direct customer interaction”, states Gilles de Richemond, Chief Executive of VSC Technologies. “This was the er-ror of hotels in fact, who lost this control. SNCF limits disintermediation, in order to control the acquisition costs of its own customers.”

DIGITIZE ... WHILE MAINTAINING CUSTOMER RELATIONS STANDARDS

Nonetheless, the digitization of customer relations also has its limits. The quality of human relations re-mains paramount, particularly for customer support or after-sales service. “Today, 60% of traditional ma-nagement action takes place through digital, but we do not want this channel to become our sole point of entry”, confi rms Francois Gonczi, Digital Director of EDF Commerce. “The telephone channel remains pa-ramount, mostly for complex actions. Human relations must continue to support the digital experience for the better.” Digital is therefore an ingredient that must be applied judiciously in the customer relations equa-tion, at the risk of having negative eff ects. A realization that is particularly true in demanding fi elds, like luxu-ry items: “We cannot allow ourselves to diminish the customer experience”, observes Sébastien Hua, Direc-tor of eCommerce & Omnichannel at Kering (formerly Pinault-Printemps-Redoute). “We therefore need to wait until the technologies that impact their experience are suitably mature. We prefer to listen to the customer rather than the imperative to continuously innovate.”

2.1.3 - Companies are learning to use data: increasing POCs and experimentation

ore and more initiatives are tapping intothe mass of data generated by consumersthroughout their journey, including digital and

physical networks. This is a big challenge: in 2022 there will be 50 connected objects per household, compared to ‘hardly’ 10 in 20151. “Data collection at every point of

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is carried through to diversifying media campaigns: “Beyond Google and Facebook, we are also focusing on Spotify. Marketing teams need a change of mentality: this means no longer using Facebook for the sake of Facebook, but having media campaigns, full-stop.”

SUPPLEMENTING CATALOGUES WITH MARKETPLACES

Companies are also focused on extending or diver-sifying their catalogue of products, by looking to mar-ketplaces. 73% of companies surveyed in our panel re-vealed that they have launched alternative distribution platforms. The challenge is selling products that are not stored in-house, but available through wholesale partners, who charge a commission. Darty is an ambi-tious example. Their Director of Marketing & Digiti-zation Direction, Christian Lou, provides the details : “The Darty catalogue contains 15,000 entries, the marketplace must manage 350,000... we expect to see nearly a million entries in the future.” The approach is extending to the provision of services, as seen by the creation of an AccorHotels marketplace: “We realized that we were doing nothing to improve turnover in our hotel restaurants. The marketplace allows the cus-tomer to book their meals online at the same time as booking a room”, describes Vivek Badrinath, Deputy CEO in charge of Marketing, Distribution, Digital and IT for AccorHotels.

CUSTOMER-CENTRICITY: A BULKWARK AGAINST DESINTERMEDIATION

Maintaining customer relationships can also help li-mit disintermediation. “With disintermediation, banks would risk losing their customer relationships, and would have to make do with the margins made on ac-count processing fees”, analyzes once again the Direc-tor of Digital, Transformation and Quality Develop-ment at BPCE. This vision is shared by other traditional players, like the SNCF. “For SNCF, Voyages-sncf.com

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contact is a real strategic imperative and also allows us to meet customer expectations of fl uidity, coherence and practicality”, announces Katia Hersard, Director of eCommerce & Marketing at FNAC.

The Internet of Things helps to further refi ne ana-lyses, by fi nding new data sources. “In 2017, we will launch a health program which can choose to utilize the Internet of Things, according to the customer’s wi-shes”, evokes Carline Huslin, Director of Digital Trans-formation and Customer Experience at Generali.

STARTING SMALL WITH POCS

The fi rst step, before embarking on large scale expe-rimentation, is to establish necessity and technical feasi-bility. Pilot projects begin with POCs (Proof of Concept), an essential fi rst step before confronting the technical or human related problems of growing to scale. Compa-nies mostly take a pragmatic approach, known as ‘test and learn’. “Our POCs which haven’t yet reached scale, do not suff er from strategic integration defaults’", de-tails Antonia McCahon, Global Digital Acceleration Director at Pernod Ricard. “It is more of a question of synchronization: scaling occurs on a voluntary basis in our subsidiaries, we do not wish to impose anything.”

PILOT PROJECTS MUST MEET CUSTOMER NEEDS

For these pilot projects, the main imperative re-mains economic viability, which depends directly upon customer adoption. Pure plays, who have grasped how data can make considerable growth possible, often have a head start. “We are launching experiments in beta mode, such as helping a host to adjust their price for peak and off -peak periods, with the input of a maximal price”, reveals Nicolas Ferrary, Country Manager of Airbnb France.

SCALING-UP: A QUESTION OF TIMING

The success or failure of an experiment also comes from a delicate balance between the maturity of demand and that of the stakeholders of the organization. The external economic environment is also evolving, which could remove possible partnerships with providers. This brings the risk of creating an unusable pilot program. Success also depends upon the level of urgency: “We are not in a direct situation where there is competition from disruptors”, analyzes Florian Sauvin, CDO of Bel. “My role therefore, is to inject urgency into digital.”

BIG DATA: TOWARDS THE END OF MASS STANDARDIZATION

In the Big Data era, the supply of services or marke-ting campaigns is becoming highly customizable. This ability to infl uence the end customer more accurately can benefi t all players that formerly followed B2B2C mo-dels, and mass retail in particular.

DATA SERVICES

The growing importance of the Internet of Things and Big Data is thereby directly infl uencing the evolu-tion of products and services, and accounts today for one of the foremost levers of innovation. Digital innovation

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Source : BCG

he challenges of innovation are clear for all to see. Companies are also accelerating the de-velopment of incremental internal innovation.

Integrated into active operations, they rely upon inter-nal resources, from the formulation of ideas to their im-plementation. They do not change existing models, but seek to optimize them. “Our company is a well oiled machine, that optimizes its business model in an incre-mental manner, because we need to produce viable and reproducible results”, comments Yann Leriche, Chief Performance Offi cer at Transdev.

INCREMENTAL INNOVATION: OPTIMIZING EXISTING MODELS THROUGH DIGITAL

For distributors who have physical stores, incremen-tal innovation could mean developing new online func-tionalities that extend web services to track consumption and billing with smart meters. “Our ‘e.quilibre’ solution, included in our home customer package, already pro-vides our customers with tips for reducing their ener-gy consumption through algorithmic analysis of their bill”, observes François Gonczi, Digital Director of EDF Commerce. “Tomorrow, the calculations will be even more precise because they will have access to the data coming from the Linky meter”.

In the world of sales, like the catering trade, promo-ting customer loyalty is another example of incremental innovation. “We will be launching a loyalty program for the fi rst time in our history”, reveals Jean-Noel Pénichon, Vice President Information Technology (IS & Digital) for France at McDonald's. The agribusiness group Le Duff have hopes for a similar program: “Increa-sing customer loyalty will help us to better understand when, where and how our customers eat”, explains Sté-phane Mariotto, DSI of Le Duff .

Incremental innovation can also involve taking ad-vantage of digital to move upmarket, by improving the customer experience. “Digital does not fundamentally change our business model, but it allows us to offer more value-added services to our customers”, indicates Anne Browaeys-Level, Chief Marketing, Digital & Tech-nology at Club Med. “We can improve the customer ex-perience before, after and even during their stay. For example, we have an app devoted to village activities, run by our GO community manager.”

THE BURDEN OF OPERATIONAL CONSTRAINTS

Companies often have a strong internal culture for incremental innovation, through established processes

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has brought changes such as the ‘Product as a Service’ model (deployed by 56% of the companies interviewed for this guide) and service platforms.

For companies it is no longer simply about the once-off sale of a product. They now sell services that can be monetized according to the frequency of product usage. For this, there is one key factor: a radical paradigm shift for manufacturers and builders. “According to Mary Barra, group CEO, we should see more changes in the automobile industry in the next 5 years than there was in the past 50 years’, attests Eric Wepierre, President/Managing Director of General Motors France. This ap-proach also makes it possible to broaden and diversify traditional services.

Personal data collection nonetheless carries legal risks, of which companies are wary: the customer must be able to control their personal data. “Sooner or later, users will rebel, in some form, against the monetiza-tion of their data”, warns Yves Tyrode, Chief Digital Offi cer of SNCF. Companies can anticipate these kinds of issues through proper organizational measures. “We created a position in charge of data governance, which could prefi gure the role of Chief Data Offi cer”, clarifi es Romain Liberge, Chief Digital O ffi cer (CDO) of MAIF.

2.1.4 - Companies innovate incrementally on products, services and processes

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tups per year with our R&D, so they can benefit from our development facilities”, evokes François Gonczi, Digital Director of EDF Commerce. This means accele-rating the technological maturity of the disruptions de-veloped, in order to reap the rewards early. Relationships can be developed beyond simple partnerships, by way of accelerators, incubators or investment funds...65% of surveyed companies practice in-house incubation versus 48% externally.

CORPORATE VENTURES: A FINANCIAL VEHICLE FOR INNOVATION

Company investment funds (or corporate ventures) are formed to help intensify external innovation. There are two complementary approaches: investment in a specialized fund, like those managed by Partech Ven-tures, as 45% of companies on our panel have done, or the development of an in-house investment fund. Accor-ding to a study performed by Insead1 and 500 startup funds, 50% of the the 100 Forbes Global 500 now have corporate funds. “ We invest through partner funds but also thanks to our corporate fund, Orange Digital Ven-tures”, describes Patrice Slupowski, VP Digital Innova-tion at Orange.

According to CB insights1, these private funds contri-buted to more than half of all startup fi nancing in the world in 2015. This was a 70% growth on the previous year. This is a promising expansion, even though Europe is less aff ected for the moment, receiving only 15% of to-tal fi nancing.

and practices. Organizations can sometimes be tempted to over-experiment, without setting proper limits. “I have learnt much more about digital transformation by kil-ling rather than launching products and technologies”, asserts Yves Tyrode, CDO of SNCF. “Test and learn” is also an emergent trend. Aborted pilot projects are the-refore not seen as deadweight, but as necessary trials. “There is a pilot team in charge of designing the proper KPIs and compiling the lessons to be learned”, reveals Venky Balakrishnan Iyer, Global Vice President, Digi-tal Innovation at Diageo.

2.1.5 - Companies establish external in-novation programs through venture capi-tal, accelarators and startup acquisitions

o avoid being outpaced by pure plays, tradi-tional companies must stay in the innovationrace. Big players now see startups as their

chosen partners to accelerate innovation, particular-ly innovation that disrupts their traditional activities. These partnerships often have a level of opportunism, by exploiting an immediately available technology. “For example, Leroy Merlin formed a partnership with the startup Frizbiz, in order to allow individuals to connect with each other”, underlines Christophe Verley, Chief Digital Offi cer at Adeo. “We could have developed this service ourselves, but seeing as their brand is comple-mentary to ours, it was faster to sign this agreement”. Aware of what fl edgling operations can bring to the table, more and more companies are appointing executives to orchestrate a culture of external innovation: the Chief Disruption Offi cer.

CONNECTING TO THE ECOSYSTEM

Beyond this opportunistic mindset, more and more companies are developing active links with the startup ecosystem. This desire can be seen in large-scale pro-grams: “We are beginning to screen around 600 star-

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Allianz FranceVirginie FauvelMember of the Executive Commitee -Digital and Market Management

“We have a startup accelerator, which helps us to stay as close as possible to this ecosystem. That way we pay attention to their methods and technologies. We help them to grow, we provide administrative, legal and financial support as well access to a network, but we do not necessarily im-pact their capital: we must not stifle their development.”

Interview 2.2 - INERTIAL FORCES STILL HINDER TRADITIONAL COMPA-NIES' SCALE-UPS AND THEIR DI-GITAL INNOVATION IS LESS AD-VANCED THAN PURE PLAYS AND CUSTOMER EXPECTATIONS

Confronted with new paradigms introduced by pure plays, trusted formulas no longer work as well as they used to. Traditional companies are hindered by internal inertial forces and are generally less digitally mature than their markets.

2.2.1 - Obstacles to reaching scale

ll companies, whether they are established players or pure plays, face the burden of theirhistory. Vestiges of this heritage are found in

internal organization and are often a source of friction. These obstacles are chiefl y cultural, which can involve a clash between traditional and digital teams. “As pure plays, we avoid some of the diffi culties faced by our brands, such as the culture clash between retail and digital teams”, recognizes Catherine Spindler, Chief Marketing Offi cer at vente-privee.com.

At the heart of this problem, digital can be seen as a threat by colleagues, particularly when performance in-dicators for the physical sales networks and online sales channels are poorly indexed and refl ect badly upon the cross-channel systems in place. “The challenge for us is culture shock, since our hundred-year-old history is very tied to our physical store.”, confi des Caroline Delorme, Omnichannel Director, Galerie Lafayette

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Grands Magasins. “The sales teams must come to un-derstand that the web is not a competitor: in-store sales assistants must become real ambassadors for the ecommerce site, in order to improve omnichannel tur-nover. It is a real challenge, particularly for small re-gional stores.”

“Changes to responsibilities and professions na-turally meet resistance”, underlines Virginie Fauvel, Member of the Executive Committee - Digital and Market Management, Allianz France. “The biggest challenge is changing mindsets, even more than the technological dimension.” There is also the burden of established processes which create sub-cultures that are diffi cult to change: the famous silos. “The history of a company creates working habits, particularly in terms of processes”, adds Carline Huslin, Head of Digital and Multichannel Customer Experience at Generali France. “They come to think that if a company has always func-tioned in a certain way, it isn’t worth changing things.” The cultural change that needs to take place for most players involves putting the customer at the heart of the process. “We need to move to a customer-centric culture: the priority of every job, whether it be IT, HR, marketing or legal, must be the customer.”

Beware of false steps however: digital transformation can reveal longstanding dysfunctions, which partners grew to tolerate. “One of the dangers, when we em-bark on something new, is opposition from an element that already functions below desirable levels”, warns Florian Sauvin, CDO of Bel. “This is why we have stu-died the weak points of our existing elements before-hand with the DSI.”

AN INEVITABLE LOSS OF CONTROL

These cultural obstacles are often combined with static management, who must adapt to changing times and take the plunge into the unknown. “Our biggest hin-drance, is decision making”, evokes Cristina de Ville-neuve, Chief Digital Transformation Offi cer at BNP Pa-ribas. “For example, the data question remains a real no man’s land, a dangerous taboo! But I am convinced that you have to test the waters somewhere and see where it leads.”

This is compounded by a fear of loss of control by middle management. “Today, we are still working like in the old days, from a human rules engine, whereas the best players must lean on machine learning”, admits Thibault Gosse, Head of eCommerce at Numericable SFR . “We know that in the long run, machines are much stronger than humans, but this type of technology still scares marketing and digital teams, because you lose control of the message sent to the customer”.

The President of Nespresso France shares this need for transparency: "I spend my time repeating to my ma-nagers that controlling information will not give them more power”, insists Arnaud Deschamps. “It is also so-metimes a trivial question of the distribution of power and individual ambition”, analyzes Pascal Buff ard, President of CIGREF. “Large, powerful companies lo-gically have more diffi culty examining themselves and changing.”

AN INTERNAL MANAGEMENT UPHEAVAL

Beyond human talent and management styles, digital also modifi es the traditional key performance indicators (KPIs) of companies. These must be rethought, in order

41


to avoid any counter-productive eff ects on overall eco-nomic performance. “We faced a fi rst challenge with cross-channel sales, namely: the risk of competition between the new online distribution channel and the older offl ine channels”, recognizes Roland Harste, Se-nior Vice President for Marketing at Swarovski.

“The most delicate aspect of organization is to ex-plain that the raison d’être for web sites is not only to produce turnover, but also in-store custom!” under-lines Erick Bourriot, Head of Commerce Connecté at the Beaumanoir Group. These performance indicators become more granular as the organization collates more and more internal data, sharpening its BI and Analytics performance. “There is a great temptation to measure everything, but there is a risk of creating slow and pointless complexity”, warns Gael de Talhouet, Vice President Digital Transformation at SCA . “Just be-cause it is digital, this doesn’t mean you need to mea-sure everything.”

These phenomena have repercussions on company structure, which must become more and and more trans-versal. Historically sequestered divisions now fi nd them-selves working together, through increasingly matrix-or-ganized fl ow systems or project platforms. “Why have a matrix organization? Omnichannel is by nature trans-versal, which calls the entire team into play”, advances Caroline Delorme, Omnichannel Director, Galerie La-fayette Grands Magasins.

New digital subjects naturally tear down certain si-los. This idea is explained by Christophe Verley, Chief Digital Offi cer of Adeo Services: “Data, like mobile in the past, and certainly IoT tomorrow, is a ‘bowling-ball’ subject for the organization, which must knock down most silos, to be properly capitalized upon.” This

activity directly impacts governance and we will return to it in Chapter 4.

“There are people that shouldn't really stay in a po-sition of power in the organization, who are at mana-gement positions because of the time spent in the or-ganization. A good change leader should be able to put the right people in charge, and to make them report at the proper level in order to make them responsible for that change”, advances again Tom Brady, Group Head of Digital at SABMiller. “The company must accept a little loss of power, including internally, by reducing silos”, summarizes Pascal Buff ard, President of CIGREF. “Or-ganizations must become more horizontal in order to remain reactive.”

2.2.2 - Traditional players remain short of the digital innovation levels set by pure plays and customer expectations

ot all companies have the same awareness of the magnitude of the transformation taking place.Many are still waiting for the signal innovative

disruptions of their sectors to become more profi table and are mostly sticking to the digitization of sales chan-nels.

Even worse: only 25% of surveyed companies declare earning more than 25% of their revenues via digital chan-nels, with customer satisfaction still leaving a lot to be desired1.

“We are not yet experiencing a major disruption in business models for fi nancial services”, announces Sé-verin Cabannes, Global Head of Client On-Boarding &

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PURE PLAYS HAVE A GREATER DIGITAL MATURITY

With the growing power of online commerce, we ob-serve the increasing coexistence of two models: full on-line, which sees transactions coming exclusively from digital channels, and a hybrid model, which combines new online sales channels with the traditional physi-cal network. It is no surprise that pure plays, digitally mature masters of full online, often provide a fully di-gital end-to-end customer experience with more acces-sible, fun websites. By contrast, traditional players still fi nd themselves between steps 2 and 3 on our diagram, between the development of online channels and the di-gitization of processes.

Referential Projects at Société Générale.

Historical players mostly prefer to use proven business models rather than taking risks, according to a BCG publi-cation1. Even for the more audacious large scale innovators, the impact on their turnover still remains modest. “We talk a lot about click and collect, but 80% of our sales revenue still comes from stores”, recognizes Christian Lou, Direc-tor of Marketing & Digital at Darty.

Added to this lack of maturity is another problem: cus-tomer perception. Despite all the eff orts employed to digi-tize, customer expectations are not being met1. Customers complain of both a lack of choice and quality in the available channels. This is a defi nite sign of a fl awed transition to di-gital activities.

43


BCG/SIMILARWEB MATURITY ANALYSIS

Tangible proof of this trend: large ecommerce plat-forms like Amazon, Ebay, Craigslist and Leboncoin.fr do-minate the global rankings of most consulted sites, com-piled by the online traffi c analysis service SimilarWeb (respectively placed 4th, 32nd, 49th and 109th). By contrast, hybrid players are recording the humblest per-formances. A study of sectorial digital maturity carried out by BCG, using data from SimilarWeb, helps to un-derstand how digitization aff ects players’ web presence. It is based on traffi c data from the principal European transaction sites (content sites or commercial platforms).

BCG has used these fi gures to prepare an index of digital maturity, along 3 axes of comparison:

1. The channel used (mobile or computer), which helps tounderstand in which situations the consumer connects.2. The bounce rate, otherwise known as the site’s capa-city to retain the browsing user, which is based on 3 cri-teria: the interface design, the relevance of content and/or services provided, and the technical performance of the page.3. The source of traffi c, in order to determine strategiesfor site access.

In each of these indicators, the performance of histo-rical players remains below the standards set by the best pure plays. While today 58% of Amazon’s site hits are from mobile devices, traditional players are still mainly accessed from computers. The bounce rate is also higher for traditional players, reaching nearly three times that of Leboncoin.fr from a computer and 1.7 higher from a mobile device. Traffi c sources show strongly diverging trends. Direct traffi c is the main source of traffi c for pure plays, at 49.3%. For traditional sites it is search traffi c, at 49.4%, which shows that they have succeeded in building online brand recognition along with a traffi c acquisition strategy that makes them less dependant on interme-

diaries like Google. This is mainly achieved through in-vestments in CRM and Social, leading to more accurate targeting and a more advanced customization of promo-tional communications.

OFFERS STILL FAIL TO MEET CUSTOMER EXPECTATION

Featuring a less mature digital approach than pure plays, traditional players still lag behind in customer satisfaction. According to a BCG-Nice study on the banking, insurance and telecom sectors, consumers re-main very dissatisfi ed with available digital services. Pure plays themselves must remain vigilant, as their di-gital maturity runs the risk of shrinking over the years. “Digital is a perpetual state of beginning again, even for digitally native pure plays”, observes Catherine Spindler, Chief Marketing Offi cer at Vente-Privée.

The threat is even more serious, because disruptive startups are still outweighed by GAFA. In May 2016, Google announced the addition of a car-sharing functio-nality (Waze Rider) to its community vehicle guidance application Waze, currently only available in the USA. This brings direct competition to the car-sharing ser-vices developed by fl edglings like Blablacar, Uber and Lyft.

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CH AP- TER3

362

CHAPTER 03�: BEST PRACTICES FOR ACCELERATING SCALE-UPS

3.1 - Accelerating scale-up, the IBM approach

P. 47

p. 49

3.1.1 - Digital: from transformation to reinvention p. 493.1.2 - Scaling Up: digital industrialization p. 50

3.2 - The Data-driven company, or the overall improvement in competitiveness thanks to internal and external data p. 51

3.2.1 - The Internet of Things and Big Data: 2 arguments for competitiveness and innovative business models p. 51

3.2.2 - Open data, hackatons ... data to be utilized both inside and outside of the company p. 53

3.3 - Digital IT: a more agile and fl exible IT architecture for surviving market change p. 54

3.3.1 - IT is becoming more agile and is working closer with the other departments p. 543.3.2 - The IT role must be fl exible, to maintain the running of operations p. 56

3.4 - Collaboration is a competitve lever: breaking internal silos and embracing open innovation p. 56

3.4.1 - Greater transversality inside the organization p. 563.4.2 - Openess to major partnerships and external open innovation p. 58

3R 03�: BEST PRACTICES FOR ACCELERAR 03�: BEST PRACTICES FOR ACCEL

- Accelerating scale-up, the IBM approa- Accelerating scale-up, the IBM

3.1.1 - Digital: from transformation to reinv.1 - Digital: from tran

48

03. Best practices for accelerating scale-ups3

Digital is a springboard to competitive growth. Today, GAFA and pure plays are leading by example. In a rapidly changing world, best in class players accelerate their transformation through three levers: data analysis, agile and fl exible computer systems, and the arrival of new collaborative and multidisciplinary work methods. Data utilization improves the overall performance of a company beyond simply tweaking customer relations, and creates a new model for data-driven companies. Digital transformation, by infl uencing every profession, profoundly reconfi gures the traditional role of computer systems within organizations. ISDs are transformed into agile and fl exible teams in the pursuit of more transversal goals. Legacy systems are being more easily accessed thanks to APIs. The catalyst for this transforma-tion is clearly the human factor: collaborative methods are becoming more transversal (agile methods, test and learn…) and they create a vital force that transcends silos and even company walls. Interdependence with the ecosys-tem is accentuated by open data, such as the open innovation model. The big challenge? Appropriating disruptive innovations from ecosystems outside of the company.

03 .Best practices for accelerating scale-ups

349

3.1.1 - Digital: from transformation to reinvention

ver the past decades IT budgets have been mi-nimized through ERPs, or centralized systems,such as core-banking. Each company optimizes

its physical value in relation to its direct competitors, by improving its operational excellence and therefore redu-cing costs. However, in recent years new technologies have emerged: the cloud, social media, mobility, the In-ternet of Things and most recently, cognitive computing. As a result we have seen huge developments in data utili-zation. Parallel to this, new competitors and more impor-tantly, new business models have materialized.

Hungry for success, new entrants aim for a disruptive strategy. This means appropriating a new culture and new working methods. Here again, traditional players must draw on disruptive experiences, test new collabo-rative ideas, and undertake the digital transformation of their organizations. Otherwise, they risk meeting the same demise as Kodak or Virgin Megastore.

Digital reinvention essentially involves transforming the data available to companies to reinvent disruptive services: • Telecom operators are now off ering banking services• Connected Cars make new mobile services possible,

but also data collection and optimized maintenance• The insurance sector is reinventing itself with the

development of the Internet of Things

This collaborative creation of digital value now takesplace in conjunction with the customer, and draws on the methods of new entrants (Service platforms, Design Thinking, Factory, Academy,...)

Take EMLyon, who dealt with the arrival of new en-trants (mainly American) on their territory, by creating the fi rst ever digital campus. The management school was able to combine transformation and new service creation. This co-creation is a true diff erentiating fac-tor for EMLyon. The vast majority of French companies and organizations are now aware that the digital trans-formation is taking place and will continue with or wi-thout them. Nonetheless, they must also beware of the opposite extreme, the creation of ‘digital excess’. Some organizations are leading a competitive ‘race to POCs’ (Proof of Concept). By overdoing Design Thinking, some companies have developed more POCs than they know what to do with.

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3.1 - ACCELERATING SCALE-UP, THE IBM APPROACH

What obstacles need to be avoided and what good practices need to be fostered in light of the digital trans-formation? How can scale-ups be accelerated? Here are IBM Interactive’s tips for successful digital reinvention..

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Digital Reinvention 2016 - 03. Best practices for accelerating scale-ups

T3.1.2 - Scaling up: Digital industrialization

here are 4 keys to success for scaling-up:

1. PlatformsNew entrants have based their success on platforms,which is why traditional companies need to react by buil-ding 3 paired and complementary platforms:

• The industrial platform (System of Record) collectstransactional data. This company history will remain in existence and become increasingly industrializedand normalized.

• The digital platform (or System of Engagement) cap-tures external data. It is becoming more and moreprevalent. It uses permanent innovation to improvecustomer proximity (internal or external).

• The cognitive platform (or System of Insights) incor-porates the analytics and big data functions of theorganization.

Combining these 3 platforms is crucial, and is done with the most innovative tools such as APIs, the DevOps ap-proach, and optimal planning for development cycles both long and short.

IBM FranceMarc Bensoussan Vice President - General Manager at IBM

The cognitive platforms that demonstrate the idea of ‘augmented intelligence’ are distinguished by 3 very particular and totally unique qualities:

• A profound comprehension of natural lan-guage. This ability to understand the meaning and context of information harnesses the entire mass of unstructured information, internal or ex-ternal.

• The formulation of arguments based on evi-dence, which postulate a tree of hypotheses, that respond to direct questions. Each of these hypo-theses is presented with an index of statistical relevance, accompanied by sources cited by Wat-son, making it an excellent system for assisted decision making.

• IBM Watson improves with use. The under-lying technology is based on learning, and, like a human being, IBM Watson learns and improves from qualitative evaluations of its answers.

IBM Expert Opinion

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2. Co-creation and creativity with customersCompanies must reinvent all of their front and back of-fi ce processes that deal with customer experience. Theparticipation of customers and the ecosystem is inva-luable during these stages of Design Thinking. LivingLabs, Customer Data Lab and Pool UX/UI concepts thenappear. This is why a studio or digital agency that canhelp the company to have a clearer understanding of cus-tomers, can prove to be a useful ally.

3. Digital industrialization with diff erent factoriesFactories help with digital industrialization, by ensuringthe optimal delivery of web, mobile and even cognitiveapplications, without neglecting integration with exis-ting systems or initial test phases. They are actually cru-cial and too often overlooked : “The more creative youare in the Studio, the more industrial you should be inthe Factory.”

4. Managing change and the evolution of skills: The Aca-demySkills’ evolution and change management are essentialto helping this digital reinvention. Management me-thods must also adapt to these changes. The evolution ofinternal skills leads to upskilling programs, such as theorganization of hackathons.

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3.2 - THE DATA-DRIVEN COM-PANY, OR THE OVERALL IMPRO-VEMENT IN COMPETITIVENESS THANKS TO INTERNAL AND EXTERNAL DATA

The explosion in the volume of data collected by companies has opened new horizons for growth. The Internet of Things, Big Data technologies and open data have become new levers for the data driven company to steer its processes, transform the customer experience and broaden its areas of innovation. hange

3.2.1 - The Internet of Things and Big Data: 2 arguments for competitiveness and innovative business models

n Germany, Industry 4.0 could create producti-vity gains of up to 8% and raise GDP by a point,in the next ten years1. An industrial revolution

which now holds an extra lever for action: company and customer data, which not only helps to create innovative products and services, but also to optimize the assets and internal processes of the company. The combination of sensors and Big Data also helps companies with ope-rational activities.

Barbara Dalibard, former General Manager of SNCF Voyageurs, illustrates this trend with an example : “From statistical data, we can perform predictive mapping of the most risky zones for collisions between our trains and wild animals.”

Sensors are nothing new for industry. They have been used for many decades: the Internet of Things is simply

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another stage for them, that provides widespread inter-connection through the internet.

Combined with Big Data techniques (data crunching) and predictive analysis, captured data has the potential to optimize professional processes. “The fi ght against money laundering and the improvement of our scoring tools are Big Data priorities that are far more important than CRM for us”, explains Olivier Gavalda, Deputy Di-rector at Crédit Agricole. Nonetheless, the Internet of Things seems to have a much more signifi cant disrup-tive eff ect on customer relations than internal processes. “In the short term, I see the Internet of Things as part of our factories or in our relationships with dairy sup-pliers, more than in our customer relations”, believes Florian Sauvin, CDO of Bel. “This second vision has the most impact on business models.”

BIG DATA CREATES MARKET VALUE

Maintenance, internal processes...Big Data algorithms help to value internal and external data and improve its utilization. But outside of company walls, this is above all a market value, and lends itself well to new B2B and B2C off ers. “We have developed a Big Data tool entirely for boiler technicians”, describes Hervé-Matthieu Ricour, CEO France BtoC of Engie. “This is push marketing, where customers, before their visit, are informed of of-fers that could interest them by SMS”.

Patrice Slupowski, VP Digital Innovation of Orange, describes his take : “By indexing the trail left by users in mobile networks (anonymized under CNIL supervi-sion), we can provide marketing insights to our stores that inform them of the profi les and visit times of their physical customers.” This enthusiasm is shared by Fran-cois Gonczi, Digital Director of EDF Commerce, who anticipates the customer data provided by Linky meters: “Our big data infrastructure is ready! All that remains is to think of the uses for this new mechanism...as well as feeding the data lake with another data source: IoT.”

Nespresso FranceArnaud DeschampsFrench Division President

“For me, the race for Big Data looks more and more like a race to data storage, which seems irrelevant to me. I believe much more in the real-time use of data than in storage, which will also be extremely ex-pensive and raises security problems. The challenge is the utilization of data in real-time. Analyzing the past is not enough to predict the future.”

Interview

ETHICAL DATA TREATMENT, TO MAINTAIN CUSTOMER CONFIDENCE

Although they have not yet been industrialized to a large extent, IoT technologies are already an area of exploration for all: “Like the web, and then mobile, IoT has the power to unsettle a certain number of in-dustries, the automobile industry being an example”, explains with enthusiasm David De Amorim, Head of Innovation at Docapost. “The cars of the future are no longer to be seen in Auto Shows, but at CES in Las Ve-gas”.

This infl ux of data drives new business models, but requires ad hoc governance. The challenge is to defi ne this governance of data by adapting to local regulations and maintaining customer confi dence. “If the new ser-vices developed are convincing, customers will autho-

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he security of user data is seen as a serious imperative for all, and regulatory complianceobligations are there to ensure they are pro-

tected. Though data can be seen as a war treasure to be protected, it can often be more valuable for users outside of the company. Companies are now beginning to make their knowledge available through open data programs. In fact the French government is leading by example in making data public, with the opendata.gouv.fr platform and the Jutand Report of March 2015, which invited transport operators to share their data. Companies are now following suit, tempted by the potential for innova-tion which counterbalances the risk of revealing strate-gic information. Hackathons are another valuable way to explore possible innovations.

HACKATONS: A BRIDGE TOWARDS INCUBATION

Of the companies on our panel, 39% declared having organized open hackathons, to accelerate innovation through collective intelligence. Hackathons should be thought of as competitions for teams of external develo-pers, designers and innovators, to innovate using com-pany data. According to BeMyApp, a specialist in com-pany developer relations, more than 70% of hackathons have the goal of creating an innovative application1. In over 70% of cases, the winners see their solutions pushed to incubation, either internally (20%) or through an out-side organization (50%).

Public hackathons are also developing: in 2013, they mainly consisted of IT specialists and graphic designers, with an opening up to business school students in 2014, and the inclusion of startup creators in 20152. “Our latest hackathon took place at ESSEC, on the theme of the connected home”, declares Guillaume Oreckin, De-puty CEO of Pacifi ca. The topics are also becoming more specialized, dominated by leading technologies (such as virtual reality) that are more and more advanced (from up to 10% in 2013 compared to 40% in 2015), which gua-rantees the participation of specialized developers, and therefore the quality of the proposed technological solu-tions.

A TOOL FOR COMPANY ACCULTURATION

45% of companies interviewed for this guide also hold internal hackathons. “These have a positive eff ect on change management, and help promote company acculturation. It involves confronting a diff erent way of working and teaches us to expand our horizons of development”, argues Jérôme Hombourger, Group De-puty CEO - Development & Strategy -Credit Agricole Consumer Finance.

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rize us to access the necessary data”, thinks Francois Gonczi, Digital Director of EDF Commerce. “The battle will be fought on regulatory compliance and customer confi dence”.

For this reason, some companies choose to limit the scope of Big Data: ‘Our pricing mechanism is an algo-rithm based entirely on data collected during face-to-face interviews or fi lled out by the prospect on the in-ternet”, tempers Guillaume Oreckin, Deputy Director at Pacifi ca. “To introduce other sources, such as social media data, would be against the law and unethical, and furthermore would betray customer confi dence.” In the UK, 20% of the population says they are willing to use ad-blocking programs to avoid being tracked on the internet and repel ultra-targeted ads. Transparency is therefore a crucial component of high added-value services.

3.2.2 - Open data, hackatons ... data to be utilized both inside and outside of the company

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3.3 - DIGITAL IT: A MORE AGILE AND FLEXIBLE IT ARCHITEC-TURE FOR SURVIVING MARKET CHANGE

We’ve come a long way from the ‘IT Doesn’t Matter’ mentality espoused by Nicholas Carr, in an infamous Har-vard Business Review article from May 2003. Long seen as a support function, IT is one of the spearheads of the digital transformation, even though not all information systems are digitizing at the same speed. In greater proxi-mity with the work being done, as well as being more agile and fl exible, IT teams are adjusting to become key drivers of digitization, driven by their critical technical skills.

3.3.1 - IT is becoming more agile and is working closer with the other departments

SD digitization is primarily driven by the va-rious needs of the other departments, who steerit to deal with new imperatives, most often in a

distinctly digital direction. This MO has clear implica-tions on the distribution of roles within an organization, as IT teams must work much closer with other depart-ments than in the past. Today, marketing teams acquire technological skills that are key to customer relations based on the quality of front offi ce applications. Parallel to this, ISDs are opening up to new skillsets related to the architecture and processing of data, which sometimes entails separate teams from traditional IT departments, under the supervision of a Chief Data Offi cer.

According to BeMyApp, motivations range from team building (40%), and internal innovation (40%), to the dis-covery of high-potential digital profi les within the com-pany (20%). Accordingly, close ties with the IT team be-come crucial. “We initiated an internal tool called Open Ideas for the IT team”, indicates Vivek Badrinath, De-puty CEO in charge of Marketing, Distribution, Digital and IT for AccorHotels. “This allows us to collect inno-vative ideas, which inspire our internal hackathons.”

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IBM FranceMarc Bensoussan Vice President - General Manager at IBM

ISD transformation

"ISDs must transform their relationships with other departments, as evoked during many of our interviews. The long cycle ap-proach must give way to more agile me-thods such as DevOps. The day has gone when information systems were very inte-grated and difficult to change. Frameworks like SCRUM provide the means to manage iterative development methods. ISDs must adapt to the demands of digital and trans-form their models to better meet the needs of each department. “

Expert opinion AGILE METHODS ARE THE NEW NORM

However, in order to work in a more transversal way, i.e. increase the number of stakeholders without aff ecting the time-to-market of projects, working methods are evolving, and are becoming more collaborative. Agile method bring together projects, domain experts and bat-tle hardened developers, and are seeing great success. This is a profound transformation for IT teams: develop-ment cycles, known as V-Models, prove to be long and expensive.

THE CHALLENGE OF WORKING CLOSELY WITH ISDS TO MANAGE "DIGITAL" PROJECTS

The proliferation of projects earmarked as ‘digital’ no-netheless runs the risk of ISDs losing their support func-tion role, with internal functions given free rein over the design of their own systems. The challenge for ISDs lies in guaranteeing the ease and quality of maintaining systems and applications which are not always built to common standards. IT departments must therefore contribute to establishing common rules for software de-velopment, and enforce them in a centralized way.

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3.4 - COLLABORATION AS A COM-PETITIVE LEVER: BREAKING IN-TERNAL SILOS AND EMBRACING OPEN INNOVATION

The main driver of digital transformation is fi rst and foremost human, through novel collaborative methods that help organizations become more transversal. The goal, inside the company, is to break away from traditio-nal silos, in order to work more easily with each and eve-ry department. Collaboration must also take place with closer ties to the startup ecosystem.

3.4.1 - Greater transversality inside the organization

igitization, by driving the evolution of work de-vices, transforms the entire organization andreconfi gures it according to digital modalities.

This means acculturating the organization to digital, in order to change attitudes. “Changing the behaviors and working methods of our community of 140,000 col-laborators in 75 countries is our greatest managerial challenge”, confi des Séverin Cabannes, Deputy Chief Executive Offi cer of Societe Generale Group.

TRANSVERSAL COLLABORATION BREAKS DOWN SILOS

It comes as no surprise that agile methods are a royal road to destroying silos within a company and gaining valuable time-to-market by accelerating innovation pro-cesses. Nonetheless, the agilization movement is just getting started. Only 14% of companies interviewed for this guide declared running more than 35% of their pro-jects in agile mode.

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3.3.2 - The IT role must be fl exible, to maintain the running of operations

-speed IT’ is a recurring term, so much so that57% of surveyed companies fi nd themselvesin this situation. But is it a methodology to be

avoided or a crucial readjustment phase? The answers are varied: “We chose to evolve IT to keep in step with digital, rather than create a two-speed IT”, declares Virginie Fauvel, Member of the Executive Committee - Digital and Market Management at Allianz France.

Others contrast two logics that are hard to compare: “I have a problem with the notion of two-speed IT, I prefer to talk about long and short development cycles, which is less pejorative”, clarifi es François Gonczi, Digital Director at EDF Commerce. “In presenting it in this way, you are inevitably going to frustrate whoever is associated with the slower speed.” Even more so, consi-dering certain legacy ERPs are ill-suited to agilization: “Our SAP teams, who are very useful in our profession, which is greatly based on stock management, continue to work according to classical project methodologies”, confi des Stéphane Mariotto, Group CIO at Le Duff .

FOCUS ON MODULARITY WHEN INTEGRA-TION IS A SHORT-TERM UNCERTAINTY

In practice, the budget allocation for digital is less than 35% for 68% of companies interviewed for our panel. This is considerable, given that maintaining operational conditions is the main expenditure for ISDs. Digital is therefore a priority, but problems remain: insurers and bankers, for example, have traditionally dealt with lega-cy back offi ce systems that are diffi cult to migrate, which gives them greater constraints. The most common solu-tion is APIs, which overcome technical inconsistencies to access back offi ce information. “APIs allow us to unplug from legacy, one step at a time”, summarizes Cristina de Villeneuve, Chief Digital Transformation Offi cer at BNP Paribas.

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CIGREFPascal Buff ardPresident

Digitizing the façade without reviewing the ar-chitecture is inefficient

"IT departments must also reorganize themselves in order to deal with the demands of iterative develop-ment, which could involve partnerships with a broa-der ecosystem or newer, more agile ways of working. That said, ISDs are not alone in the need to become more agile, other departments are also implicated. It is especially important to rethink the architecture as well as the façade. Redoing the façade without thinking to review back office systems and pro-cesses is catastrophic and counter productive! Core IT must also be modernized, but this doesn’t neces-sarily mean that it must be replaced. In this respect, IT architecture is becoming a key role, charged with the heavy task of identifying suitable anchor points between Core IT and Fast IT, to guarantee both speed and durability. The fact remains that IT sys-tem maturities vary considerably from one company to another...they must find the strategic alignment which guarantees them a Business Partner status. In reality IT and marketing have a lot in common! For both, reinvention is imperative.“

Interview DIGITAL PORFESSIONAL COMMUNITIES

Improved communication is another lever for trans-formation. “The fi rst step to establishing new collabo-rative working methods, is excellent communication that breaks down silos”, feels Thierry Elkaim, Senior VP Digital Transformation at Transdev. Leaders now promote professional communities, which aff ord em-ployees greater freedom and the opportunity to devote themselves to new projects. Business social networking is a good example. However, working transversally with little hierarchy is not always easy in highly structured organizations. Traditional methods such as the internal information letter are still prevalent. “The newsletter is a classical top-down tool, but it works well: it allows us to pick up the most important digital news, external (75%) and internal (25%)”, explains Michael Aidan, Vice Chief Digital Offi cer at Danone.

LEAVING TRADITIONAL HIERARCHY BEHIND

To support these communities, organizations are learning to adapt and hierarchies are changing, often according to a matrix organization. “Many diff erent en-terprise metrics, leadership styles, and organization styles coexist in Tesco, such as the matrix form orga-nization,” comments Thomas Nielsen, CDO of Tesco. Companies are putting in place more horizontal struc-tures or divisions, to push competition between collea-gues and carry the rest of the organization in their wake. Some prefer to build on established forces: in this way Groupama uses its Amaguiz subsidiary as an internal innovation platform. “This means we are not point-lessly creating extra teams and having to develop new skills”, considers Thomas Vandeville, Director of Digi-tal Transformation.

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CDO of Malakoff Médéric. Players who roll out struc-tures designed specifi cally for internal innovation seem to be in the best position.

At the other end of the spectrum, acquiring a startup is a sure-fi re method of establishing innovative struc-tures that already have the right skills and expertise. This tactic is known as ‘acqui-hiring’. “The challenge for each international acquisition is hiring the local teams without having to recruit externally”, recognizes Fré-déric Mazzella, Founder and CEO of Blablacar.

PARTNERSHIPS BETWEEN MAJOR PLAYERS

Traditional companies and startups also have other kinds of collaborative relationships. They can extend to strategic partnerships between major players. GAFA are the preferred choice in this regard, because they unders-tand the essence of major partnerships: “We have strate-gic partnerships with Google and Facebook”, confi rms Vivek Badrinath, Deputy CEO in charge of Marketing, Distribution, Digital and IT for AccorHotels.

ALIGNEMENT ON OPEN INNOVATION

Here is open innovation writ large by traditional players: the enrichment of internal innovation pro-cesses combined with a search for outside technologies and know-how. The levers of open innovation adhere to key laws: agility, APIs and Open Data, social networks, partnerships with fl edgling companies, corporate ven-turing, hackathons… The big companies are keenly aware of the importance of aligning with each other via consortiums, to defi ne new standards for the future disruptive innovations in their sectors. “At the end of 2015, we created Wizway Solutions, a joint-venture in partnership with Orange, RATP and Gemalto to work on paperless ticketing”, reveals Barbara Dalibard, for-mer CEO of SNCF Voyageurs.

A NETWORK OF DIGITAL EXPERTS TO STI-MULATE TRANSFORMATION

Digital skills are not only an IT concern. Companies are now running wide ranging awareness campaigns: “More than 4000 employees have already gotten their ‘digital passport’, which was launched a few weeks ago and which should help the 38,000 employees to be comfortable with the language of digital”, enthuses Christian Buchel, Deputy CEO and Chief Digital & In-ternational Offi cer at Enedis (formerly ERDF).

But beyond large scale training programs for all em-ployees, digital requires new expertise. “... we did create a critical mass of senior leaders who are actually pro-moting the digitalization program and making it hap-pen with their own people”, describes Soren Hagh, Exe-cutive Director Global Marketing at Heineken. “We believe this can create a 'coalition of the willing': when leaders carry on initiatives that showcase to the rest of the organization the opportunities of digitalization.”

However, not all talents are necessarily available internally: companies must often recruit. “Everybody wants to go to Google, but we also need high potential profi les!” announces Roland Harste, Senior Vice Pre-sident Global Marketing de Swarovski.

3.4.2 - Openness to major partnerships and external open innovation

eyond collaboration within the company, themost agile organizations also hold an externaladvantage. Being open to the ecosystem is now

seen as a key element of digital transformation. The im-perative for agility remains omnipresent: “Startups do not have the patience to wait 6 months for us to have completed a development internally: we need agility to interact with them”, recognizes Hicham Badreddine,

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EDF CommerceFrançois GoncziDigital Director

The 3 indispensable ingredients for digital transversality

" The acceleration of transversal digital pro-jects within the company requires a combination of 3 key ingredients:• Simplified access to the highest levels in the

hierarchy of decision making chains,• The projects concerned must have internal

prominence, with great emphasis on commu-nication. In reality, being recognized for theirtrue value is one of the main motivations foremployees to participate in transversal pro-jects, who are often less visible outside oftheir respective silos,

• A certain amount of funding to open a fewdoors and lift barriers.“

Interview

GeneraliCarline HurslinHead of Digital and Multichannel Customer Experience

Acculturating colleagues to the startup mind-set without embarrassment, an internal challenge

"The importance of skills sponsorship (legal, IT, HR…) is two-fold: beyond the stated goal of creating startups to deal with particular business issues, it is also a means of imbuing our own experts with the culture of entrepreneurship! If the schema was reversed, the message certainly wouldn’t get through. But by putting them in the role of instructors, there is reciprocal exchange and acculturation. The goal is the demystifica-tion of the startup mindset, which our colleagues sometimes look down on. In the long run, it will help our colleagues to escape silos and the limi-tations that come from the burden of processes, to achieve transversality. “

Interview

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CH AP- TER4

460

CHAPTER 04�: TAKING THE MEASURE OF DIGITAL MEANS PASSING FROM ‘DIGITAL EXPERI-MENT’ MODE TO ‘LARGE SCALE DIGITAL’ MODE AND PROFOUNDLY TRANSFORMING ORGA-NIZATIONS

4.1 - The BCG approach: an analytic framework for guiding transformation

4.1.1 - Readjusting company strategy 4.1.2 - Redesigning the comsumer experience 4.1.3 - Reinventing the supply of products and services 4.1.4 - Redefi ning company processes 4.1.5 - Building the opporutnities and scope of tomorrow's productions 4.1.6 - Accelerating digital transformation

4.2 - A new chart of skills and job roles

4.2.1 - Digital entails profoundly rethinking processes and organizational methods 4.2.2 - Reconfi guration towards data requires new expertise 4.2.3 - IBM's Digital Transformation 4.2.4 - AccorHotels, Groupama, 2 additional examples of successful digital transformation

4.3 - More agile governance to transform the company

4.3.1 - The necessity for high level support 4.3.2 - New digital champions at the executive level

4TER 04�: TAKING THE MEASURE OF DIGITAL MMEASURE OF’ MODE TO ‘LARGE SCALE DIGITAL’ MODE ANALE DIGITAL’

TIONS

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The digitization of products and services brings with it the inevitable re-confi guration of organizations. To complement these changes brought about by the large scale development of digital innovations, organizations initiate major in-house digital transformation programs. These are driven by the new demands and new roles within companies, which signal the emergence of a new model for data-driven companies. The mapping of processes and skills are profoundly aff ected. Companies are being reorganized around more cus-tomer centric models as well as the fl ow of data. The challenge is great, and there are many obstacles to fi nding a winning strategy that refl ects com-pany culture and historical decisions. A general approach is best, which al-lows companies to focus their eff orts on a few major projects (see the BCG approach). The economic environment is bustling with exemplary models, such as IBM, who will present their own digital transformation in this chap-ter. Nevertheless, these sometimes colossal projects should be directed from a high level and should follow clearly defi ned strategies. The creation of new executive directorships is a strong signal from high-level leaders of digital adaptation, introducing new internal and external methods.

04.Taking the measure of digital means

4projects (

with exempnsformation

cts should be drategies. The cre

om high-level leadexternal methods.

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4.1.1 - Readjusting company strategy

he fi rst indispensable stage in digital transfor-mation is to clarify what it means, from whichthe main areas for transformation will emerge.

Leaders see the importance of a clear strategy, which could ultimately learn from the company’s history and past errors. “Digital transformation is an existential challenge for insurers, mutual healthcare providers and pension funds”, alerts Guillaume Sarkozy, Mana-ging Director of Malakoff Médéric. The diff erent fl oors of the digital edifi ce allow for the review of each dimen-sion of the company, which is an opportunity to remem-ber some good practices.

4.1.2 - Redesigning the consumer experience

ew standards of customer consumption, im-posed by GAFA and pure plays, must be obser-ved. Customer expectations are conditioned by

the methods of the most innovative companies, who also

have the highest customer satisfaction ratings. Compa-nies must therefore adapt themselves to reinvent the customer experience. A careful eye must be kept on cer-tain metrics like the acquisition, retention or conversion of customers, without overlooking their satisfaction and level of engagement. The customer centric approach puts the customer back at the heart of the process. Eff orts are then turned to creating a uniform customer pathway, namely by eliminating the most painful aspects, and by working on new responses to previously unfulfi lled re-quests.

4.1.3 - Reinventing the supply of producats and services

o deal with the high expectations of the consu-mer, it is important for companies to diversifyand make a radical shift to new paths. Products

are now being digitized to the point of personalization,

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4.1 - THE BCG APPROACH: AN ANLYTIC FRAMEWORK FOR GUI-DING TRANSFORMATION

What strategy should be adopted to provide solidfoundations for the digitized company? BCG have deve-loped an analytical framework to help leaders obtain a general vision of their digital strategy and target prima-ry areas for transformation.

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Digital Reinvention 2016 - 4. Taking the measure of digital

thanks to the collection of customer data. Providing di-gital services in the form of software is another approach favored by consumers. This is particularly true given the rising importance of mobile as a sales and interactive channel : today's digital services must also be available in the form of mobile apps. Banks have a hand in this do-main, and have every interest in making the experience as fl uid as possible. Just as Facebook centralizes the content and services of other sites in a single platform, banks must simplify and centralize every aspect of the banking transaction.

4.1.4 - Redefi ning company processes

igital profoundly reconfi gures organizational processes and makes incredible productivitygains possible. Companies must adapt in the

same way to remain competitive: the adoption of digi-tal processes simplifi es matters. The challenge, beyond the reduction of costs and errors, is increased rapidity of execution and innovation, in short, greater customer satisfaction. This redefi nition of processes aff ects the entire company: sales channels and marketing services that are adopting the customer centric approach, R&D which is now focused on innovation. New importance is given to after-sales service for greater customer satisfac-tion, namely through automating the fl ow of customer data to the company. HR and fi nance are also implicated and must be automated: “Digital could almost eliminate the HR function in its current state”, advances Cristina de Villeneuve CDO of BNP Paribas. This strategy is pro-ving to be a winner. By digitizing their services, a large insurer was able to reduce operational costs by 50%, re-duce ancillary costs by 2 million euros and increase the productivity of its agencies by 67%.

4.1.5 - Building the opportunities and scope of tomorrow's productions

cale-up is in preparation: in terms of digitiza-tion, its is better to start small before spreadinggood practices as well as winning technologies.

Agile methods are having real success. Interaction with an ecosystem of partners is also necessary to enrich the innovative capacities of the company, by opening them up to the outside world and and developing new skills in the digital domain. In technological terms, platforms are asserting themselves as the production tools of to-morrow. Finally, data processing will certainly play the most crucial role in building these production tools of the future.

4.1.6 - Accelerating digital transformation

igital transformation is a process that could be-nefi t from various catalysts that accelerate itseff ects. The goal is reduction of the time-to-mar-

ket of innovations, in order to outpace the competition. This fi rst concerns prototyping, which must be carried out according to a continuous learning process. Attrac-ting good digital talent clearly plays a key role in sustai-ning organizations’ test and learn methods. Externally, the incubation of startups and corporate ventures are a lever for acceleration which companies no longer hesi-tate to use. Internally, establishing digital governance similarly helps acceleration.

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4.2.1 - Digital entails profoundly rethinking processes and organizatio-nal methods

igital profoundly aff ects the mapping of a com-pany’s processes and job roles. 61% of leadersinterviewed for this guide recognize that digital

transformation aff ects more than half of their colleagues in their daily job performance. Several mechanisms are at play: omnichannel brings with it the sharing of on-line and traditional processes, while internal customer centric concerns also rework these processes to render them more fl uid. This means integrating digital into tra-ditional job processes and not keeping them separate.

A CUSTOMER CENTRIC REWORKING OF OPERATIONS

As well as being integrated according to the omni-channel model, job processes are being reorganized around the customer, through what’s known as customer centric strategies, in order to limit the painful aspects of the customer pathway. Depending on the complexity of pathways, for players such as bankers or insurers, the projects can be of considerable size. Séverin Cabannes,

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Deputy Chief Executive Offi cer of Societé Generale Group announces: “All banking processes are aff ected. The transformation of the interaction with our cus-tomers takes up most of our energy, but our working methods are also aff ected by this transformation.”

SUPPORT FUNCTIONS ARE ALSO AFFECTED

New collaborative working methods bring greater transversality to the company, which can be seen not only in operations, marketing and communication, but also in support functions, like HR, fi nance and IT.

4.2.2 - Reconfi guration towards data requires new expertise

ob processes can also be rethought using the fl ow of data between the diff erent services of acompany. Well aware of the structuring nature

of data, companies are pursuing exhaustive mapping procedures. In an environment of growing regulatory de-mands (data portability, Safe Harbour…) for companies, roles must be clearly defi ned. And with good reason, as it is the company’s ability to take advantage of its data which determines its success as a data driven company.

“Digitization forces us to redefi ne the integration of the fl ow between physical networks and digital chan-nels, for a seamless customer experience”, confi rms Thomas Vandeville, Director of Digital Transformation at Groupama. The mapping of data is the fi rst step before the creation of special structures for data governance (which can be supervised by a Chief Data Offi cer).

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4.2 - A NEW CHART OF SKILLS AND JOB ROLESDigital upsets organizations by forcing them to reconfi -gure their processes, job roles and skills within the com-pany. Mastering the fl ow of data plays a key role, and re-quires hiring new profi les.

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ESSENTIAL EXPERTISE FOR THE INDUSTRIALIZATION OF DATA

The expertise related to the data sphere (data scien-tists, data architects) must also be integrated at every level, from head offi ce to subsidiaries, which may require the recruitment of data specialists. Big Data is also in-corporated into traditional expertise, such as insurance actuation. “As well as recruitment, our actuaries are becoming increasingly digitally literate”, declares Tho-mas Vandeville.

DATA STORAGE: FROM SQL TO DATA LAKES

These new skills are anchored in the IT Department, the traditional domain of company databases. Data sto-rage technologies have evolved considerably: structured databases (SQL style) are ill-equipped for the storage of non-predefi ned formats, which leads to greater creati-vity in big data processing. To deal with this, companies establish a new style of data warehouse: data lakes. The purpose of these monumental databases is no longer ex-


New modes of big data administration

“There is a lot of talk about the new Big Data technologies which organize the storage and analysis of data, such as Data Lakes, for example. These tools are helpful in building an operatio-nal management support system, which wasn’t possible for previous technologies like data war-ehouses. This new generation of data storage can now support the provision of real-time services. IT departments must invest in these new platforms, by building them in partnership with the other departments, and developing their expertise.”

Interview

VSC TechnologiesGilles de RichemondGeneral Director SNCF Technologies

The 3 new key IT skills and the danger of the cloud for data management

“Digitization combines 3 aspects for IT : de-velopment of computing, data, and operations. The value of computing development is reco-gnized more today than 5 years ago, but this un-derstanding must also extend to operations and infrastructure, who are currently seeing pressure towards offshore externalization, similar to IT a few years ago, mainly by way of the cloud. But the cloud is not a miracle cure for infrastructure and data management issues! In order to have good exchange between technical partners, you must properly understand their jobs and the common issues you face.”

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perimental: they are totally operational, working in real-time thanks to accelerated processing speeds. “Our data lake is able to process 5 years of browsing history in 2 hours, where before this would have taken days”, ad-vances Christophe Leray, CIO at PMU. Companies can now free themselves from BI analysts who are not always effi cient in real time.

CLOUD VS BIG DATA: 2-SPEED DATA?

But not all data is intended to be stored internally! There is a real challenge to supplying data lakes with unstructured information for Big Data programs, and companies are seeing the economic benefi ts of externali-zing their classically structured data into the cloud. The principle is based on volume eff ects: the more customers there are, the lower the prices, due to the high level of cost pooling. The maintenance of IT infrastructures is seeing radical changes. Revenue generated by IBM’s cloud activity accounts for 10.2 billion dollars, an in-crease of 61% from the previous year1. The trend towards cloud migration may be slow but it is irrepressible. All companies have engaged in this approach, not always for their core system, but for a growing number of professio-nal applications (HR, messaging, CRM…).

4.2.3 - IBM's Digital Transformation

IBM FranceNicolas SekkakiCEO IBM France

A century-old company, IBM has continually rein-vented itself to anticipate the evolutions of its market and customer expectations

“On an organizational level, by making digital a lever for operational excellence, we have highlighted activities with strong potential for growth by creating ‘internal’ startups: Watson, Internet of Things, IBM Stu-dios, ...These allow us to develop new expertise, expe-riment with service platforms and accelerate our own transformation. Thanks to IBM Studios Paris, created at the end of 2014, we help customers to build their own Studio by passing on our expertise and know-how.

The digital transformation has also had an unde-niable impact on company culture. It inspires the evo-lution of leadership expertise: focus on client and not product, the ability to coach instead of monitoring, collaborative skills...IBMers are collaborating to deve-lop new cognitive services, like the Cognitive Build initiative for example, which brought together 275,000 employees worldwide, who then deve-loped more than 2,700 cognitive projects with Watson, in less than 4 weeks. ”

Interview

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This diversifi cation strategy also extends to the high end segment : by buying OneFineStay, the group hopes to attract a new type of clientele with long term renting in private residences that provide all of the classical ser-vices of a hotel. Airbnb are also on the trail for the luxury market. The group relies on other strategic acquisitions to support its ambitions, via equity investments in star-tups like Oasis Collections and SquareBreak.

roupama: While less severely hit than thehotel sector, insurers are also seeing their eco-nomic environment in upheaval. The Loi Ha-

mon law, by simplifying the termination of insurance contracts, has endangered some well established posi-tions of dominance. To emerge victorious from future changes, Groupama has undertaken a radical digital transformation. The creation of a digital branch, attached to the group CEO and represented at the executive com-mittee, is the spearhead. Its main project is to draw on the work of Amaguiz, the group’s pure play, to conceive a more fl exible and digital orientated group architecture. This all-round digitization also aff ects customer data. Groupama has also put in place a DMP and is carefully preparing for the wave of the Internet of Things, which promises to be a true revolution for insurers.

In order to anticipate these coming changes, the in-surer has partnered with Renault. Automobile manufac-turers, by imagining increasingly connected cars, are to the forefront in data collection at the source, without having the need to connect any extra equipment. This is a daring bet on the future by Groupama. The group has no problem with expanding its strategic partnerships to diversify its business model. They have partnered with Orange to create Groupama Bank, which allows them to enter the banking market with the advantage of the large distribution network of a telephone operator. To help an-ticipate the next major disruptions, the group has also built an Innovation Lab in Silicon Valley and forged a partnership with the venture capital fi rm Partech.

The permanent reskilling of teams is a foundational element of our change management approach. Think Academy, the biggest company MOOC, is embodied and driven by Ginni Rometty, IBM CEO, who personal-ly hosts each session. In two years, over 18 training ses-sions with 337,000 participants, Think Academy has be-come a major program for the digital transformation of our company.

But this digital transformation is for us only a pre-liminary step towards a more profound transforma-tion, which will make IBM a cognitive company. We are already using cognitive systems to improve our user ser-vices or to identify the commercial opportunities in our market with more precision.”

4.2.4 - AccorHotels, Groupama, 2 ad-ditional examples of successful digital transformation

ccorHotels : Seriously threatened by hotelsector disruptions, AccorHotels recognized theneed for reinvention and innovation, as prac-

ticed by its pure play competitors. The group has de-veloped a marketplace open to independent hotels and has widened its supply without growing its active base, which allows it to compete with Online Travel Agencies (OTA) and asset light players like Airbnb. By focusing on customer knowledge, the group can off er customized services throughout the reservation process. They are also focused on new off ers, and are not afraid to move towards ‘anything as a service’, by off ering new services to optimize its assets, such as renting rooms by the day or renting beds in a dormitory to compete with youth hostels in the low cost segment.

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Boston Consulting GroupGuillaume CombastetProject leader

More agile, transversal and simple gover-nance methods for digital transformation

“5 year strategic plans are no longer adapted to successful digital transformation. • Governance must become more agile. The accele-

ration of technological change and usage habitsdrives continuous strategic adaptations.

• Transversal governance is also a considerablechallenge. Digital reinforces the interdependencebetween IT and other departments. In terms ofgovernance, this means collaboration with everydepartment, with a special eye on IT.

• But governance must also be simple. Decidingupon a framework, and allowing freedom for exe-cution without local interference, will guaranteeresults.

The most advanced companies have met these challenges with digital committees that involve Co-mex, the use of test and learn, the creation of duos between IT and job roles for pilot projects, and ear-nings indexed on the implementation of these pro-grams...But beware ‘agile’ does not mean disorga-nized. Successful digital transformations are all piloted by programs based on rigorous reporting systems and report directly to Comex.”

BCG Expert Opinion 4.3 - MORE AGILE GOVERNANCE TO TRANSFORM THE COMPANY

The profound changes brought about by the digital transformation within companies could not be sustained without the full support of high level leadership. CEOs and executive committee members steer the formation of a digital vision for the company, which results in the creation of new executive positions for the acceleration of transformation.

4.3.1 - The necessity for high level support

or digital transformation to have its mark upon an organization, it must have high level sup-port, which is essential to creating a common

vision for the transformation and aligning the diff erent responses from each division. This is particularly crucial for international players, who are by nature quite decen-tralized.

THE EXECUTIVE COMMITTEE MUST BE A DRIVER FOR TRANSFORMATION

This high level support can take diff erent forms ac-cording to the history of each company. In this respect executive committees play a key role in the transmission of a strategic vision: 72% of companies interviewed for this guide push their transformation directly via their CEO or a Comex member.

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Crédit AgricoleOlivier GavaldaDeputy CEO

Embarking leadership in the digital transformation

“If there isn’t strong governance to tidy up, digital transformation cannot work. The pro-blem with our current project methods is that everything is anchored, which means that if even a little arbitrage is necessary, management becomes reluctant and would prefer not to risk green-lighting an imperfect project, for fear of backlash from the powers that be...But the devil is in the details. There is therefore a need for a really strong engagement from a high level to define the digital stance. Otherwise, everybody stays in their silos and nobody understands each other. We regularly bring digital to the Comex level, even though the members have varying le-vels of digital knowledge.”

InterviewA NEED FOR HIGH LEVEL ARBITRATION

Executive oversight ensures digital transformation KPIs which help high level arbitration. Digital governance also means making a detailed review of indicators, by job role. “Operations teams do not need the same indi-cators as the team in charge of digital transformation, but certain digital indicators must be shared”, declares Antonia McCahon, Global Digital Acceleration Direc-tor at Pernod Ricard.

4.3.2 - New digital champions at the executive level

To link management committees and job roles,companies are naturally led to creating digitalgovernance positions, which most often come in

the form of a Chief Digital Offi cer (CDO). 65% of compa-nies interviewed for this guide have offi cially created the position of CDO. The CDO’s job is not to bring about di-gital transformation by themselves, outside of the pro-fessional channels, but to stimulate the change and relay it to the highest levels. These positions are often attached to Comex (46% of surveyed companies), to the CEO (27%) or to a member of the company who in turn reports to Comex. “Being Chief Digital Offi cer, my immediate boss is the Chief Customer Offi cer, who reports to the group CEO”, relates Thomas Nielsen, CDO of Tesco. Silo heavy organizations do not yet want to name CDOs on the board. “We made the choice not to create a new seat of power at the group level ex nihilo”, comments Cristina de Villeneuve, Chief Digital Transformation Offi cer at BNP Paribas. “It is therefore for subsidiaries to decide individually if they wish to create a CDO po-sition, and defi ne its place within their own organiza-tion.”

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Company governance methods are at odds

“The governance of digital transformation is at odds with the traditional functions of the com-pany. There is no single model, but we can ob-serve 3 main dimensions: the external dimension, which is embodied by a function like the Chief Disruption Officer, in charge of evaluating new disruptive models from the ecosystem, which co-mes with an internal dimension in the form of a Chief Digital Officer, and ultimately is reinforced by a Chief Data Officer. Their role is to communi-cate the transformation and at times to be a cata-lyst for it. They are not called to make the trans-formation, but to stimulate and support it. The more ‘traditional’ management still have a role to play: the question of information management in the wider sense is fundamental. Governance must also be supported by a strategic vision at the hi-ghest level. Each company has its own specific forms of governance, with only one thing for cer-tain: those who innovate compared to established models are the ones who succeed..”

InterviewCHIEF DATA OFFICER: THE MASTER OF INTERNAL DATA

Digital governance entails more and more data go-vernance. Companies are faced with a data revolution of increasingly exponential volume, as well as extensive re-gulatory hurdles, to which they must react. This has ins-pired the creation of the position of Chief Data Offi cer. This profi le is often under the supervision of the Chief Digital Offi cer. “Our Chief Data Offi cer is attached to the digital management board”, reveals Jean-Chris-tophe Lalanne, EVP & CIO Group Air France KLM . “He is in charge of the vision and evaluation of customer data.” He/She generally supervises a team of data scien-tists.

ROLES MORE IMPORTANT THAN THEIR TITLES

New digital positions, beyond the Chief Digital Offi cer and the Chief Data Offi c e r, ar e in creasing, to me et th e new demands faced by companies in their digital trans-formation. This imperative recently led to AccorHotels creating the title of Chief Disruption & Growth Offi cer. “He supervises our division in charge of startup re-lations”, underlines Vivek Badrinath, Deputy CEO in charge of Marketing, Distribution, Digital and IT for the AccorHotels.

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CON- CLU- SION

C108

igital transformation is fi rst and foremost a matter of digital maturation. In 2016, simplyconducting pilot projects in the digital domain

is not enough: companies must move forward, learn and mature.

The economic rules of the game have changed. GAFA and pure plays are totally committed to the digi-tal reinvention of traditional activities and are shatte-ring existing conventions. Disintermediation, platform economies, systematic data utilization, automation, the multichannel approach, harnessing mobile devices...all of these factors combine to reinvent customer relations.

In this respect, consumer usage habits are the focus of attention, much more than the products being sold.

Furthermore, competition is taking on new forms: en-tire sectors of the industry which took decades to build are being challenged by new entrants that drive establi-shed business models to evolve.

As a result, companies are forced to profoundly rethink their organization. This entails the digitization of job processes and the use of omnichannel, as well as untold customizations of off ers and services. The collec-tion and processing of data in the Big Data model must also be undertaken. New management functions are ap-pearing: Chief Digital Offi cers, Chief Data Offi cers and Chief Disruption Offi cers embody the need to make qui-ck and eff ective changes in response to technological transformations.

DIGITAL INNOVATION BEGINS WITH BEING OPEN

In this dynamic context, innovation is even more ines-capable. Nonetheless, innovation is not a heroic or solita-

ry endeavor. Companies are inspired by the greatest exa-mples to accelerate their transformation, and revise their innovation strategies. Cooperation and open innovation are the watchwords. Having an exclusive idea is less im-portant than rendering it concrete at the right moment.

The challenges are nonetheless diff erent: startups must build a vision and develop it rapidly, while traditio-nal companies must energize the organization with new working methods and new expertise. These innovations take two distinct forms. On the one hand incremental changes serve and enrich existing business models. On the other hand, economic models must be changed when faced with disruptive innovations that can unsettle en-tire sectors of the economy, like those of Uber, BlaBlacar or Airbnb, who intend to completely reshape standard models.

BUSINESS MODELS CHANGE, TRANSFORMATION ENDURES

The ability to transform continuously promises to be vital for the companies of the future. Those who don’t keep up risk much more than just lagging behind. Nokia was the world leader in the mobile phone market in 2007, the year that Steve Jobs launched the fi rst iPhone. It seems that a new economic revolution is emerging. The asset light model is clearly shaping the archetype.

"Thanks to the sharing economy, what was once indi-vidual property can now be shared", asserts Frédéric Ma-zzella, founder and CEO of BlaBlacar. The usage value of property is now being optimized, by shifting to a model based on intensifying the use of existing assets, rather than mass production. This movement will also strike a chord with growing environmental concerns.

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Conclusion

CON-TRIBU-TORS

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Contributors

76

Vivek Badrinath AccorHotels Marketing, Distribution, Digital and IT for the AccorHotels Group

Deputy CEO Travel & Transportation

Christophe Verley Adeo Services Chief Digital Officer Retail Jean-Christophe Lalanne

Air France-KLM EVP CIO Groupe Air France KLM Travel & Transportation

Nicolas Ferrary AirBnB France Country Manager Travel & Transportation Virginie Fauvel Allianz France Digital and Market Management Member of the

Executive Committee

Insurance

Isabelle Moins Aviva Head of Direct activities, Digital, Customer Marketing

Member of the Executive Committee

Insurance

Amélie Oudéa-Castera Axa Group Chief Marketing & Digital Officer Insurance Eric Bourriot Groupe Beaumanoir Head of Digital Business Retail Florian Sauvin Groupe Bel Chief Digital Officer Member of the

Management Board CPG

Frédéric Mazzella BlaBlaCar Founder & CEO Travel & Transportation Cristina Cordovez de Villeneuve

BNP-Paribas Chief Digital Transformation Officer Banking

Philippe Poirot Groupe BPCE Digital Development, Transformation & Quality Director

Banking

Pascal Buffard CIGREF President Professional Club Anne Browaeys-Level Club Méditerranée Chief Marketing, Digital and

Technology Travel & Transportation

Magalie Noé Groupe CNP Assurances

Chief Digital Officer Insurance

Hugues Le Bret Compte Nickel Founder & CEO Banking Olivier Gavalda Crédit Agricole SA CEO Banking

Serge Magdeleine Crédit Agricole SA Chief Digital & Marketing Officer Banking Jérome Hombourger Crédit Agricole

CACF Development & Strategy Group Deputy CEO Banking

Christelle Le Berre Crédit Mutuel Arkéa

Arkea Credit Mutuel Le Square Director

Member of the Executive Committee

Banking

Michael Aidan Danone Group Global Head of Digital VP Digital Brand Platforms

CPG

Christian Lou Darty Chief Marketing & Digitization Officer

Retail

Contributors

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Yann Aubriet Darty Digital Development Director Retail Simon Baldeyrou Deezer COO & Deputy CEO Medias & Entertainment Venky Balakrishnan Iyer Diageo Global Vice-President Digital

Innovation CPG

David de Amorim Docapost Innovation Director Professional Services François Gonczi EDF Digital Director E&U

Hervé-Mathieu Ricour Engie BtoC CEO France E&U Christian Buchel Enedis (Formerly

ERDF) Chief Digital & International Officer E&U

Guillaume du Gardier Ferrero France Head of Digital CPG Katia Hersard FNAC Global Chief eCommerce &

Marketing Officer Retail

Stéphane Pallez Française des Jeux Chief Executive Officer Gaming Industry Caroline Delorme Galeries Lafayette Omnicanal Director Retail Eric Wepierre General Motors

France CEO France Automotive

Carline Huslin Generali France Head of Digital and Multichannel Customer Experience

Insurance

Thierry Benhaim Grosbill CEO Retail Thomas Vandeville Groupama Head of Digital Transformation Member of the

Executive Committee

Insurance

Soren Hagh Heineken Executive Director Global Marketing CPG Albert Asséraf JC Decaux Head of Strategy, Studies and

Marketing Medias &Entertainement

Sébastien Hua Kering E-Business & Omnichannel Director Retail Nathalie Balla La Redoute CEO Retail Fabien Sfez Lagardère Active Head of Digital Development Medias & Entertainment Stéphane Mariotto Le Duff Group CIO CPG Romain Liberge MAIF Chief Digital Officer Insurance Guillaume Sarkozy Malakoff Médéric Deputy CEO Insurance Hicham Badreddine Malakoff Médéric Chief Digital Officer Member of the

Executive Committee

Insurance

Jean-Noël Pénichon McDonald’s VP Information Technology Services Arnaud Deschamps Nespresso CEO Member of the

Executive Committee

CPG

Contributors

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Thibault Gossé Numéricable - SFR Head of e-commerce Telecom Patrice Slupowski Orange Digital Innovation VP Telecom Stéphanie Cabale Orange Digital Marketing VP Telecom Guillaume Oreckin Pacifica Deputy CEO Banking Antonia McCahon Pernod Ricard Global Digital Acceleration Director CPG Christophe Leray PMU CIO Gaming industry Tom Brady – SABMiller Group Head of Digital CPG Gaël de Talhouet SCA Vice President Digital

Transformation CPG

Yves Tyrode SNCF Chief Digital Officer Travel & Transportation Barbara Dalibard SNCF Voyageurs CEO Travel & Transportation Séverin Cabannes Société Généralenérale D CEO Banking Jean-Pierre Rémy SoLocal Group CEO Professional Services Roland Harste Swarovski Senior VP Global Marketing CPG Thomas Nielsen Tesco Chief Digital Officer Retail Marc Gigon Total Marketing &

Services VP Digital Oil & Petroleum

Thierry Elkaim Transdev Senior VP Digital Transformation Travel & Transportation Yann Leriche Transdevv C e Performanf ce Officer Member of the

Executive Committee

Travel & Transportation

Catherine Spindel Vente-privee.com Chief Marketing Officer Retail Gilles de Richemond VSC Technologies –

voyages-sncf.com CEO Travel & Transportation

he Electronic Business Group is a professional community of businesses active in the industry,services, media, marketing, telecommunica-

tions and IT sectors.

The EBG comprises 600 member companies and 120,000 professionals, 4,000 of whom have VIP status, mea-ning that they are CEOs, chairmen, managing direc-tors, department directors and/or members of executive committees. The EBG is the most important business network centered around digital economy in France, and its members include all CAC 40 listed companies and 97% of those listed on the SBF 120.

The EBG has hosted most Chief Executive Offi cers of large French companies and a wide variety of internatio-nal companies leaders such as Bill Gates, Gerhard Zeiler, Michael Dell, Maurice Lévi and Luca di Montezemolo, as well as many top-level politicians and scientists.

The EBG board of directors comprises top-level Euro-pean, American and Chinese individuals:o Stéphane Richard, CEO of France Télécom-Orange,Chairman of the EBGo Didier Quillot, President of French Professional SockerLeagueo Jean-Bernard Levy, Chairman of EDFo Steve Ballmer, Former CEO of Microsofto François-Henri Pinault, Chairman of Keringo Sir Martin Sorrell, CEO of WPPo Wu Janmin, Chairman of the Beijing Institute of Diplo-macy, chairman of the International Offi ce of Exhibitionso Philippe Rodriguez, Treasurero Pierre Reboul, General Secretary

T A ctivities: encourage innovation and movement within companies

The EBG allows upper management to share their expe-rience in France and now progressively abroad.

The Committees The committees of the EBG are monthly meetings held in Paris, open to all member companies staff , focused on sixteen subject areas relating to internet, innovation, new technologies and back-offi ce topics (purchasing, hu-man resources, business law, fi nance ...)On average, each committee attracts between 50 and 250 people per month depending on the format. These com-mittees come under two domains of activity: EBG Inter-net & new Media, EBG Enterprise Management

EBG 500 VIP Dinners The quarterly VIP dinners are attended by non-executive directors of member companies. On average, 400 to 500 people come to these events to listen to top-level guest speakers.

General Assembly The EBG General Assembly is attended by leading people from the world of business, politics and research. The discussions are broadcast both in English and French si-multaneously.

Brand University Professional training sessions strictly reserved for ad-vertisers and users, bringing together between 45 and 90 participants. Examples of discussed topics include: Fol-lowing KPIs, SMO, Search, Affi liation, Social Networks, Mobile strategy…

Partners

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Ligia RodriguesProject lead of BtoB Studies & Research

Tel�: +33 1 48 00 00 38Mail�: [email protected]

Renaud BonnetHead of BtoB Studies & Research


Sarah SermondadazAnalyst & Writer

Mail�: [email protected]

Philibert AdamonContent Manager BtoB Studies & Research


ublications

Since 1998, the EBG has published a variety of do-cuments, books and reports that have sold tens of thou-sands of copies.

Link for downloads: http://www.ebg.net/etudes/

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Partners

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he BCG, worldwide leader in business strategy, helps its clients of all sectors all around the wor-ld to identify the best development opportuni-

ties, to improve their performance and to transform their business. The BCG provides a business dynamics vision and expertise in order to better assist them to develop a sustainable competitive advantage, and to be more per-formant.

ow the BCG helps groups to respond to the digi-tal challengeTechnology is deeply changing the story in all

sectors. It is now integrated to more and more products and services, and has become an essential element for the performance of internal processes and services pro-vided by companies.Consumers’ behavior has profoundly changed all over the world. Connected, better informed and increasingly demanding, they expect an end-to-end effi cient service. New tools achieve to better capture and analyze their journey across all channels.

These upheavals encouraged all executives to ask new crucial questions for the future of their organization: How to think and manage the digital innovation? How digitalize its core business by reducing the complexity and the risk? How to accelerate the digital transforma-tion? How to adapt the processes while focusing on the clients? How to capitalize on the richness of data? How the IT function can create value for today and for the fu-ture?

TBCG helps the executives to identify the best opportuni-ties to enable their organization to transform itself and to create value. It follows them to complete the diff erent projects:Digitalization strategy (disruptive innovation/digitali-zation of the core business)Global agile transformation: CIO (agile, Devops, Digital Architecture) and trades (agile, data driven, customer journey)Multichannel strategies « customer centric »De-risking of major programsCreation of a digital center of competences, in order to accelerate the transformation

bout bcgperspectives.comBcgperpectives.com is the BCG editorial portalwhich gives access to innovative thinking and

concepts of our experts in strategy and management. Many leaders, academics and opinion leaders also give their opinion about the current issues. The portal gives an unlimited access to almost fi fty years of the BCG re-fl ections since the Bruce Henderson’s era, the BCG’s fon-der and one of the consulting architect in modern ma-nagement. All the content – videos, podcasts, comments and reports – are available from PC or Mac, smartphone, iPad, Facebook, Twitter and LinkedIn.

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Partners

81

Guillaume CombastetProject Leader

Nicolas de BellefondsPartner & Managing Director

Claude CzechowskiSenior Advisor

Nicolas HarléSenior Partner & Managing Director

Antoine GourevitchSenior Partner & Managing Director

Pierre MénardAssociate

Andrei LormanConsultant

ey fi gures about the BCG

• Founded in 1963• Presence in 48 countries• 85 offi ces in the world• 13 000 employees in the world• 500 employees in Paris• 3rd in the Fortune’s ranking of “The 100 best compa-

nies to work for”• More information on http://www.bcg.fr/

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Partners

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t the service of an increasingly effi cient digital and cognitive world

Big data, social networks, mobile networks, cloud and analytics are disrupting the ways of life, of work and of interaction.

The digital transformation has redefi ned interac-tions between clients, employees and partners, leading companies to rethink the concepts of experience and commitment. This leads to an explosion of the data that become a new economic resource and consequently, an opportunity to be seized.

For more than 100 years, IBM positions itself as the privileged partner of companies who innovate, with helping them to diff erentiate in a sustainable way in a highly competitive environment. IBM makes available to them the widest range of resources in the world: skills, systems, software, services, fi nancing and technologies.

reas of expertise

The development and diff erentiation projects are at the hearth of strategies for the IBM business customers. Thanks to the business knowledge and IT expertise of our teams, IBM is able to guide organisations in their di-gital transformation, as illustrated bellow.

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Our approach to the digital transformation

In order to propose always more innovative off ers, IBM runs an acquisition program in order to adapt its portfolio of off ers and services to the jobs of tomorrow.

n off ensive acquisition strategy

In progress:• BlueWolf group Llc, within the IBM Interactive Expe-

rience practice• Truven Health Analytics will join the IBM Watson

entity

In 2016:• Resilient system in the area of security• Several digital agencies ecx.io, Aperto, Resource

Ammirati• The Weather Company has enriched the Analytics

entity

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Partners

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In 2015: Alchemy API, Aspera, Clearleap, MergeHealthcare, Cleversafe, Explorys, Blekko, Phytel, Blue Box…In 2014: Lighthouse Security Group, CrossIdeas, Sil-verpop, Cloudant…In 2013: Fiberlink, Communications, Xtify Inc., TheNow Factory, Trusteer, SoftLayer, UrbanCode…More than 200 companies are added to these acquisi-tions since the early 2000, including Filenet, Cognos, SPSS, Ilog, Unica, Coremetrics, Emptoris, DemandTec, Curam Software, Algorithmics, i2, Tririga, Kenexa, Tealeaf Technologies Inc., Vivisimo, Worklight…

permanent state of innovation and an une-qualled research capacity

Research and innovation are at the hearth of the IBM strategy.

KEY FIGURES:• 3000 researchers in the world• A worldwide and annual Research & Development

budget of more than $5.8 billion, which is more than$63 billion in 10 years

• 12 laboratories in the world: United States (Almaden,Austin & Watson), Austin (US), Watson (US), Chi-na (Bejing & Shangaï), India (Delhi & Bangladore),Japan (Tokyo), Israël (Haïfa), Switzerland (Zürich),Brazil (Sao Paolo & Rio de Janeiro), Kenya (Nairobi),Australia (Melbourne), and Ireland (Dublin)

• 5 IBM researchers won the Nobel Prize in Physics• IBM is number 1 in terms of patents obtained for the

23rd consecutive year, with 7 355 patents issued in2015

• Thanks to more than 8 500 IBM inventors in US andin 43 countries in the world.

• From 1993 to 2014, IBM inventors have registeredmore than 81 500 patents in US.

• 1/3 of this patents materializes into marketed pro-ducts or services the following year

• 10% of the patents are developed with the customers

he cognitive: a diff erentiation factor

IBM is one of the only companies of its sector, which was able to reinvent itself while crossing many techno-logical eras and economic cycles. This transformation is happening in order to create a diff erentiating value for its customers. IBM does it even more in this rapidly res-tructuring IT sector.

Today, IBM is more than a hardware, software and services business. IBM is becoming a company off ering cognitive solutions and a Cloud platform.

Indeed, the digital transformation is a step on the way of a deeper disruption, where cognitive will play a key role. The benefi ts of the digital transformation as-sociated with the power of Watson and its capacities to correlate information from millions of documents within a very short time, are opening the way to a new era: the cognitive one. “The artifi cial intelligence is now dedi-cated to assist human in the daily life. Instead, let’s talk about augmented intelligence!” states Nicolas Sekkaki, President of IBM France.

Obviously, the digital transformation is an important step, but it is not the purpose of the process. The next decade will consider how to combine these elements and become a cognitive company. This will be the beginning of a new era, the 4th industrial revolution, as outlined the fi ndings of the Davos Forum 2016.

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Partners

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Rémi LassiailleManaging Director, SNCF Group, IBM France

Previously Executive Director of Global Technology Services, IBM France, Rémi Lassiaille has been appointed Managing Director in responsible for relations with the SNCF group.Mail�: [email protected] Twitter: @remi_lassiaille

Lucile Hyon-Le GourrierecSenior Advisor - Analytics Unit - Market Development & Insights - IBM Europe

Lucile's mission is to carry IBM vision on the topics of cognitive, big data, client engagement and digital transformationMail�: [email protected] Twitter: @LucileHLG

Marc BensoussanExecutive Director IBM Global Business Services France – President of IBM Interactive France

Marc Bensoussan is in charge of the consulting, solutions integration and technologies, staffi ng and application management activities, and of the Business Process Outsourcing for IBM France.Mail�: [email protected] Twitter: @MBensoussanIBM

Nicolas SekkakiPresident of IBM France

Previously Vice-President System & Technology Group Europe since 2012, Nicolas Sekkaki has been appointed President of IBM France the 1st of July 2015.Mail�: [email protected] Twitter: @nsekkaki

Partners

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Guillaume FerrandMarketing Director - IBM Global Business Services France

With more than 15 years of experience in consulting and strategic marketing, Guillaume Ferrand is the Marketing Director of IBM France GBS.Mail�: [email protected] Twitter: @_Guillaume_F

Lionel VidartAssociate Partner, Telecom & Medias - IBM Global Business Services France

The mission of Lionel Vidart is to conceive and implement transformation projects for clients of the Telecom and Medias sectors.Mail�: [email protected] Twitter: @LionelVidart

Vincent DaerdenSenior Partner, Banking & Insurance – IBM Global Business Services France

Previously Associate Partner in Insurance at Ernst & Young consulting and Partner responsible for the Insurance sector at PriceWaterCoopers, Vincent Daerden is now in charge of the Banking and Insurance sector at IBM Global Business Services.Mail�: [email protected] Twitter: @vdaerden

Emmanuel de Saint-LégerExecutive Partner, Distribution Leader -IBM Global Business Services France

Since 2013, Emmanuel de Saint-Léger is Executive Partner, leader of the retail sector of IBM Global Business Services France.Mail�: [email protected]

Partners

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Digital Reinvention 2016 - Beyond Pilot projects

Technology

Transcript of Digital Reinvention 2016 - Beyond Pilot projects