Your Best Practices

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We want to entertain you, inspire you and, most importantly, set you up for success when running your digital transformation.

To do that, we feature a host of brand new, in-depth case studies based on over 100 interviews with executives from a broad set of industries and geographies.

Get access to a load of practical tips, tools and a broad range of cases that show you how to succeed in real life.

Case Studies

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As a sneak preview to the book where we feature cases and anecdotes from more than 100 companies, we’re sharing a select few with you here.

Click on the respective company logo below to learn about other companies’ journeys.

FlixBus

Following the deregulation of the interurban bus market in Germany in 2013, it was not an established incumbent that managed to profit most – it was a start-up that started from nothing. A few years later this start-up, called FlixBus, controls more than 90% of the long-distance bus market in Germany . This was a well-planned effort. FlixBus embodies the type of eager competition that traditional firms envision in their darkest nightmares. That’s why we wanted to learn more about this success story from Fabian Stenger, now Vice President Central and Eastern Europe at FlixMoblity (the parent that operates the FlixBus brand), who joined the start-up right at its beginning.

One key learning, and something that should worry incumbents, is that there is not much red tape stopping hungry start-ups from entering an incumbent’s market. FlixBus was not concerned about their lack of experience or absence of assets that could hold them back because they knew they could win over the market with a relatively simple recipe made out of two ingredients: a smart business model and speed.

When it comes to a competitor’s business model, it’s not necessary to have the best product to be successful and win over customers. It’s sufficient to have a good product that’s distinctively different from competitors, Stenger is convinced. FlixBus was the first to add a digital component to coach travel products. They realized sooner than anyone else that new trends like WiFi and online booking can be transferred to this dusty industry. Knowing that their competitors were lagging behind on these new technologies, FlixBus strengthened their digital footprint with the big data generated via mobile and website applications to gain new market insights and improve its own operations. It analyzed customer travel and booking statistics (for example, at which price points do customers actually buy), as well as the preferred routes (for example, which routes are requested most) and so on. Based on this information and a proprietary software to optimize prices and the route network, FlixBus entered the market with a competitive offering. However, because you can’t transport any customers without busses, and because it’s obviously impossible for a start-up to buy and operate hundreds of busses throughout Germany, FlixBus transferred another idea to the bus industry: instead of buying and operating all buses themselves, FlixBus decided to set up a partner model that allowed them to scale very fast.

As you can see, all it takes is a smart business model combined with intelligent use of data and new technologies and boom – established incumbents get into serious trouble.

As the case of FlixBus illustrates, there are a number of reasons why incumbents are slow to react (or why start-ups can do it faster):

• Underestimated potential:Incumbents often underestimate the opportunity to digitally upgrade their products because they tend to be stuck in old-world thinking (“our products are good, digital components would not add any value”). Furthermore, since incumbents have to justify their investments and protect their profitability, they don’t go after opportunities that seem too small and often not yet developed). This effect is even stronger when the incumbent finds itself in a strong position, where the appeal to invest in areas that seem to have a small market potential (relative to the scale of other markets or opportunities) is even lower. As a result, they leave those fields open to new or smaller competitors.
• Different priorities:Established companies tend to have a results-oriented mindset that’s vastly different from the mindset of small companies. Being responsible for year-end results, the focus is on planning and delivering targets. As a consequence, they are very good when it comes to efficiency improvements, processes optimization, hierarchical control and the like. Small companies, on the other hand, do not have to worry that much about their financial performance – at least in the beginning – and can purely focus on unmet customer needs and pain points.
• Lack of dedication:True to the motto “all or nothing”, start-ups tend to have a much higher incentive to succeed. They can dedicate 100% of their time and resources to focus on this one opportunity. Large corporates, on the other hand, normally have a whole string of other initiatives to worry about, and digital initiatives often lack the power and support they need and are likely to remain a side stage for too long.
• Lack of speed:Incumbents’ decision-making processes tend to be very slow. Approvals are needed on several levels, so that even the simplest decision can take several months. Large organizations tend to be more cautious and find it hard to act quick and decisively. To avoid a wrong decision – which could result in a negative impact on the stock price – decisions are overanalyzed, and another 4-6 months pass without any concrete action being taken.
• Legacy issues:Even when incumbents try to act quickly, they encounter problems related to the integration into existing processes and structures. Complex legacy systems make an integration of new apps or solutions much more complicated. Ensuring compliance with all existing systems can result in an endless back-and-forth. Guess what – even more weeks and months go by before existing customers can see this cool digital stuff (while the competitor has already launched its third update and made improvements based on customer feedback during the same period).

Due to these aspects (and we haven’t even discussed other problems such as culture), incumbents are often very slow to react and respond with a competitive digital offering. Of course, once the market is developed and the true potential of digital components becomes apparent, incumbents can make up some of the lost time by entering with large investments. However, they will always be laggards, reacting to moves of the attacker instead of proactively pushing the development. If the market is one where network effects are important, the start-up will have a first-mover advantage that makes it even harder for incumbents to catch up.

Start-ups sometimes have an unfair advantage – they will try to use their timing advantage to build up scale quicker and leverage it against competitors. If the market includes network effects, scale and data (insights) can create an unfair advantage for the attacker that will make it very difficult (and costly) for incumbents to compete. Last but not least, incumbents have to obey to different economics than start-ups: Start-ups are allowed to make losses over several years, which allows them to compete in a market that’s not profitable, while incumbents need to protect their profitability and explain themselves. As a result, they can’t compete on low prices and long-term KPIs (for example, scale instead of margins). This is exactly how FlixBus pushed out one incumbent after the other – and they are not done yet. They expanded into an adjacent industry and entered the long-distance train market just a few months ago – we will see how this plays out. (Courtesy of Fabian Stenger, Vice President Central and Eastern Europe, FlixMobility, personal communication, 20/02/2019)

Key take-aways:

• Competitors don’t need a perfect product to hurt you –don’t become complacent and think that start-ups don’t have the assets or expertise to compete with you; it’s sufficient if they have one product characteristic that stands out, especially one that matters for customers.
• The secret is a combination of business model innovation and new technology –most successful start-ups outcompete incumbents by simply improving one or two dimensions of the business model, combined with smart use of new technologies (FlixBus combined the partner-model with proprietary data analytics & planning software).
• Speed matters, a lot –being able to reach scale quickly can be tremendously important, especially in markets with network effects. Start-ups will try to use the power of scale and leverage it against you.

AMAG

Whenever incumbents set up a new strategy in today’s environment, there will be no way around the question of how digitization affects the overall company strategy, and how the firm can address both S-curves and deal with potential conflicts between them. AMAG, a Swiss car importer and dealer, found answers to these questions.

During the course of its corporate strategy development, AMAG was thinking about how to best integrate the digital transformation into their overall strategy. The management team knew that “digital” cannot be seen as something separate because it fundamentally affects the existing core business as well as the future business. Furthermore, it was clear that there was no easy way around it, as the digital transformation requires many organizational adjustments and the support of many people across the organization. So, the whole topic needs to be grounded in the strategy, and it needs to be one of the top-3 priorities of the organization. This is necessary so that initiatives get the support they need.

AMAG split its strategy into three parts – Now, which covers the current business (1st S-curve); Next, which covers adjacent new business opportunities close to the core (1st S-curve); and New, which covers completely new business in the future (2nd S-curve). The Now-Next-New strategy is not “just a digital strategy”, it is also the overarching philosophy of the whole corporate strategy. But how is the digital strategy embedded in these three parts?

“Now”, which covers the current business, includes all efforts aimed at improving the core processes, for example efficiency improvements and quality improvements. Digitization supports these efforts and allows to solve problems of the core that are not new to the organization but have existed before. “Next” covers new business opportunities that are very close to existing core business. In the automotive industry, adjacent business opportunities cover e-mobility, shared services and digital sales, digital service. Digital initiatives can help to expand the core and open up new value pools for the existing business. Note that all these points address the 1st S-curve, either through improvement (for example, cost savings) or enhancement (for example, new services). “New”, which covers new business models (2nd S-curve), focuses on products and services that do not yet exist on the market. Digitization builds the foundation for many of these new disruptive business models. Serious efforts require a conscious decision from and support of the supervisory board, because of their far-sighted nature.

The whole digital transformation should always start with the core, because this is what you need in order to make a profit for the foreseeable future. Also, the core is the area that provides the money to invest in “Next” and “New”. The core business needs to accept that it has to engage in long-term digital transformation and support (that is, funding) of initiatives that focus on “next” and “new” so as to secure the continued existence of the company, Philipp Wetzel, Managing Director AMAG Innovation and Venture Lab, argues.

Now the really interesting question, and the dilemma that AMAG and many organizations face, is, how do you deal with conflicts between those three parts of your strategy? AMAG looks at every potential conflict as an opportunity to improve the core. Cooperation with start-ups and work on disruptive ideas that can potentially harm the core business will cause conflicts and problems all the time, but this must be seen as a constructive process. AMAG gets challenged by start-ups and this forces it to stay active and to adjust its own course based on new insights. So, whenever the digital unit works on something that could potentially hurt the core, Wetzel tells us the message has to be: “We still invest in it, but the core has to stay active too and adjust accordingly so that they don’t get under the wheels.” This kind of thinking will likely be a challenge to many in the organization, but that’s a small price to pay for a territory that needs conquering. (Courtesy of Philipp Wetzel, Managing Director AMAG Innovation & Venture Lab, AMAG, personal communication, 6/05/2019)

Key take-aways:

• Give your digital transformation the platform it requires –the digital transformation needs to be grounded in the strategy and it needs to be one of the top-3 priorities of the entire organization.
• Link digitization efforts to different planning horizons –consider how digitization affects your current business model in the short and medium term as well as what digitization means for new business models; develop a clear strategy for each.
• Find a way to deal with conflicts, instead of avoiding them –efforts to set up a new digital business will likely conflict with your core business. Instead of avoiding such conflicts and surrender the opportunity for disruptions to (new) competitors, the best strategies will be pro-active in nature.

BASF

Oil and water do not mix. This is something chemicals companies know better than anybody else. One in the know is Samy Jandali, Vice President Digital Business Empowerment at BASF, the world’s largest chemicals company. The oil-versus-water insight does not only make him chemicals-smart; it also makes him street-smart because it holds in a digital transformation impact measurement context too.

“There’s a stark difference between objectives and business cases for our 1st and 2nd S-curve investments”, Samy Jandali explains. “1st S-curve investments are based on a detailed analysis and business case. These investments in 1st S-curve digitalization efforts are irrevocable, whereas 2nd S-curve digital efforts are oftentimes characterized by fully reversible decisions based on market feedback. For those projects, we invariably need to make changes in direction and scope as we pursue them.” According to the VP, it would be impossible to build a waterproof business case for the 2nd S-curve because assumptions change frequently (for example, based on customer feedback during testing phases, leading to the development of different functions than originally anticipated). Instead of spending weeks on building a 1st-S-curve-like business case, a back-of-the-envelope calculation is much better suited for 2nd S-curve purposes. Estimating the future performance of the disruptive business is necessary but minimal time should be invested upfront in the business case and finetuning should be done along the way.

Another reason to limit the time spent building a business case and setting objectives is that success rates of new business models average around 10%. Traction for business models (and the chance at being among those winning 10%) is generated from testing MVPs, not from calculating potential returns after 7 years, based on a multitude of assumptions. “Multiplying uncertainty with the unknown is a useless equation”, Jandali says. “1st S-curve projects can be calculated based on experience, facts – numbers. But multiplying a vague EBIT in 5 years’ time with the likelihood of success of 10% does not make any sense for 2nd S-curve efforts, at least in the short run.”

Jandali suggests following a phased approach. Early on in the process, a classic business case and an estimation of target revenue and EBIT are simply not possible. “It’s OK and good to talk about ambition and aspiration levels but concrete targets are just wishful thinking. We don’t even know what initiatives we will end up scaling, so how could we possibly know how much they will contribute 5 or 10 years down the road,” the digital business builder comments. During those uncertain initial times, objectives need to be set along more reliably measurable, intermediary KPIs (for example, traffic, levels of satisfaction in the target group, website sign-up rates). The right sequence to focus on is: traffic first, then revenue, then profitability. Of course, these are in conflict with how traditional companies usually evaluate progress and decide on funding for next steps. “But using revenue or EBIT at this point would be fatal for all digital transformation efforts. Of course, we are a profit-oriented business and these traditional KPIs will matter in the long run – just not those first years. It’s important to communicate these intermediary objectives from the get-go, or else, when the going gets tough after two years, people start raising concerns and asking critical questions about profitability, when it’s still too early to do so. Giving it some time to flourish and prove itself is crucial”, Jandali concludes. (Courtesy of Samy Jandali, Vice President Digital Business Empowerment, BASF, personal communication, 23/01/2019)

Key take-aways:

• A back-of-the-envelope business case for your 2nd S-curve suffices –it’s better to avoid spending excessive time on making assumptions that will change soon and instead focus on getting stuff done.
• If you like to model, do that on your 1st S-curve initiatives –they rely on proven data from established markets so quantification is easier and much more reliable.
• Rome wasn’t built in a day –give the 2nd S-curve some time before you hold it to the same standards as your age-old 1st S-curve.

Michelin

You may know the tires. You may know the restaurant guide. You most likely know the chubby, friendly-looking Michelin Man. You may not yet know Eric Chaniot – the Chief Digital Officer of infamous French tire manufacturer Michelin.

When tasked with assembling his digital transformation team, it was of utmost importance for Chaniot to keep his digital squad as nimble and lean as possible. He leads the team as CDO. There is one layer of his direct reports – the digital transformation leaders. Beyond that there’s only their direct reports – the digital transformation team members. This ensures minimum red tape and maximum agility.

“60 or 70 percent of my direct reports were recruited from within Michelin. There are some exceptions, of course – like our Chief Digital Architect came from Salesforce, our Chief Data Officer from GE. But the majority have a long Michelin background. My direct reports held very senior positions before joining my team – just under executive level,” Chaniot explains. He trusts that their great network and excellent reputation within Michelin makes them bridge builders, ensuring buy-in from the core business for what the digital transformation team does. “These are very good leaders but, to be fair, they needed to adopt a new leadership style, given the kind of mode we operate in. It’s almost like they are now working in a new era. To get to that point, they got trained and were mentored. But most importantly, I always kept an open dialog between them and myself – I think this also helped the cause a lot. I bring the fresh external perspective and the expertise and experience in digital business building, while they bring the knowledge about Michelin and a great network. We complement each other very well.”

Overall, however, a solid 60 or 70 percent of his entire team, particularly driven by the layer below his direct reports, were recruited from external sources. These are digital natives who bring the functional knowledge and the experience with new ways of working. “Also, they don’t see – or choose to ignore – the complexities of a large organization, which is exactly the kind of mindset needed for our digital transformation,” he says.

This means Chaniot’s team is comprised of influential, well-connected executives from the holding company, experienced practitioners hired from outside the holding and specialists who bring the requisite functional knowledge. Freedom to source that talent as he saw fit was important for him to be able to assemble the best team possible.

Chaniot makes sure to point out the role of the set-up. “Sometimes you can hire or build all the right leaders and you are still doomed to fail because the set-up didn’t empower you and your team enough. Then it turns out it’s not a question of how smart you are or how apt you are as a digital transformation leader. It’s just a question of the set-up. That’s why I love reporting directly to the global CEO. No one ever tells me ‘that’s impossible’.” (Courtesy of Eric Chaniot, Chief Digital Officer, Michelin, personal communication, 27/02/2019)

Key take-aways:

• Focus on internal recruiting for your leadership positions –these proven executives’ reputation and network might just work wonders; add to the mix experienced practitioners, specialists and potentially past entrepreneurs
• Keep your leadership team close together –avoid excessive hierarchies and ensure an open dialog between the different types of digital transformation leaders across the two S-curves (especially when they are sourced internally)
• Set-up is key –make sure digital transformation leaders have as direct access to the CEO as possible

Alpiq

When leading Swiss electricity producer Alpiq embarked on its digital transformation, they started with a team of three people. This team was given the task to find out what the word “digital” meant for the organization. After Alpiq had defined their need to act, it became clear that a dedicated unit was needed to get the transformation off the ground.

Alpiq founded a new business unit called “Digital Technologies and Innovation”. All digital initiatives that existed at that point were spread across the organization. In a first step, they were moved into the new digital unit (the “digital competence center” archetype). From then on, the digital unit had the overarching responsibility for all digital efforts within the core business. This gave Alpiq more oversight over its digital activities and control over previously uncoordinated digital investments of the individual business units.

But Alpiq did not stop there. The original analysis surfaced that the organization had to prepare itself quickly, before it got disrupted by others, and that digitization offered opportunities for Alpiq to disrupt others, too. With the newly founded digital unit, Alpiq was all set to digitally transform its core. However, Alpiq knew that to address truly disruptive ideas and business models, it would have to create another unit that was further separated from its core business. For this reason, Alpiq established the “Oyster Lab”, a second stand-alone digital business unit focusing on new disruptive ideas (the “standalone digital business unit” archetype).

When we compare the internal Digital Technologies and Innovation unit and the external Oyster Lab, we observe a number of distinguishing factors. First, the two are quite different in terms of innovation scope and strategic direction. The internal digital unit focuses on topics of “tomorrow”, covering all digital innovations close to the core business. The external digital unit, on the other hand, focuses on “the day after tomorrow” and thus deals with all digital topics unrelated to the core business. Second, the distinct strategic foci of the two require different degrees of separation from the mothership. Compared to the stand-alone Oyster Lab, the internal digital unit is only partially separated from the core; it is still within the mothership, although on a different floor and with more freedom than the traditional business units. The external unit itself was fully separated from the Alpiq infrastructure right from the beginning and the people working there were “allowed to do whatever they want to do”, as Markus Brokhof, former Head of Digital & Commerce at Alpiq, explains. This brings us to the next important difference: the internal digital unit, being attached to and responsible for the digital transformation of the core business, relies on core processes and structures. The Oyster Lab, as an external unit, has a much flatter hierarchy and only needs to follow a minimum of governance requirements. This separation and the degree of freedom that the external unit enjoys, is critical for its success. “The legacy and governance of the mothership would not be a good environment for the Lab. To give you an example, our core would not allow them to buy MacBooks and work on systems that are not compliant with our core IT. So, you end up with conflict after conflict, which would chase away all the digital talent, which is already hard to come by,” says Brokhof.

Employees’ innovation activities are, however, limited by the boundaries Alpiq set within its digital strategy. And the external unit has to regularly report to the Group CDO, who monitors the progress and reviews how the lab works towards milestones that were defined upfront.

The link between the two S-curves is established through reporting mechanisms, the CDO oversight and control, and regular management meetings between managers of the core business, the digital unit, and the digital lab.

As Alpiq illustrates, the overarching digital strategy should be translated into an organizational structure that supports it. The degree of separation and the governance mechanisms should be determined in line with the strategy as well. (Courtesy of Markus Brokhof, former Head of Digital & Commerce, Alpiq, personal communication, 15/02/2019)

Key take-aways:

• Choose an organizational set-up that supports your digital strategy, not vice versa –if you want to be consistent, the overarching digital strategy should be carried over to the organizational structure
• The two S-curves play a different game, so give them different rule books –your standalone digital business unit, whose main responsibility is to find and scale disruptive business models, will require a flatter hierarchy and less stringent governance rules
• Don’t forget about the ties –although freedom is vital for the 2nd S-curve, consider management ties and control mechanisms (for example, through a CDO that oversees both S-curves)

AB InBev

What do you do if you’re Head of Digital Innovation of an organization that originated more than 200 years ago and you are now in charge of redesigning the innovation pipeline? That’s exactly the question that Nicolas Verschelden had to answer for himself in his new role at AB InBev Europe.

Having spent a year in the BeerGarage, AB InBev’s innovation office in Palo Alto, California, Verschelden knew that Leuven in Belgium, where AB InBev’s HQ is located, was quite different in terms of its innovation ecosystem. Contrary to the Valley, tech players and start-ups were not a stone’s throw away. However, as AB InBev has always had entrepreneurship in its DNA – how else could it have survived and prospered for more than 200 years? It was clear that Verschelden needed to find a way to leverage the entrepreneurial mindset of AB InBev’s employees. That’s why he decided that an internal approach, something AB InBev calls “intrapreneurship corporate accelerator”, was the best fit. Having found the right model, Verschelden still had to find the right format to make it happen.

After talking to innovation experts from different industries and functions all over Europe, Verschelden concluded that the infamous “Shark Tank” challenge could potentially be transferred to the corporate world. He was hoping that this entertaining format would bring a traction into the organization. Looking back, we know he was right – the internal “Shark Tank” challenge has meanwhile been scaled globally, and has contributed many high-impact initiatives that are boosting top-line growth. But let’s look at it step-by-step: how did Verschelden set it up, and how did he bring employees on board?

At the beginning, Verschelden reached out to all European business unit heads to collect their most important business challenges. He then used two distinct criteria to prioritize the long list of challenges: First, the challenges had to be “narrow enough”, that is, realistically addressable within a short time period. Second, the challenges had to be “wide enough” to drive innovation and creativity. The rest of the process is divided into two phases – the “SharkTank Challenge” phase, and the “Shark Tank Accelerator” phase.

• “Shark Tank Challenge” phase:The selected challenges are posted on an internal idea management platform where all employees are invited to comment and share their ideas on how they would propose to solve the challenges. A steering committee consisting of different functions and regions is given the task to rate the ideas based on criteria such as desirability, feasibility and viability to come up with a shortlist of twelve initiatives. The shortlisted initiative owners are then invited to give a short presentation of their idea, which results in a refined shortlist of 6 initiatives. These finalists visit a two-day bootcamp where they receive advice on how to sharpen and pitch their ideas. Finally, after completion of the bootcamp, they present their idea in front of the committee which then selects the top three initiatives and awards them the Golden Shark, Silver Shark, and Bronze Shark respectively.
• “Shark Tank Accelerator” phase”:Once the top three initiatives are selected, the ideas are tested. Initiative owners are asked to form a small team, and with their teams, they are invited to take part in a three-month corporate accelerator program in Palo Alto. As part of the program, the teams partake in trainings and coaching sessions to learn more about design thinking, agility and similar methodologies. Newly learned knowledge is applied directly to develop prototypes, test ideas and iterate them quickly. During this process, the teams also receive continuous support from a team of business experts. The business experts establish a link to AB InBev’s traditional business units. They also make sure that the teams are focusing on the right business challenge and that what they work on is something that can be integrated into and scaled in the traditional business.

At the end of the accelerator phase, the teams present their progress at the “Demo Day”, a big event that is promoted heavily throughout the organization. The committee then re-evaluates the initiatives based on the prototypes presented and decides if and how the ideas can be scaled across regions. (Courtesy of Nicolas Verschelden, former Head of Digital Innovation, Anheuser-Busch InBev, personal communication, 18/12/2018)

Key take-aways:

• Involve the core business as early as possible –the core needs to sponsor, support and scale initiatives in the traditional business.
• Leverage your internal assets –don’t underestimate the willingness and creativity of your employees.
• Establish lighthouse projects –to prevent innovation efforts from being a one-time exercise, you need to generate excitement and success stories early on.