digitally outsmart the competition during the recession
TRANSCRIPT
MAGENTA ADVISORY RESEARCH
Digitally Outsmart The Competition During The Recession
MagenTa aDvi sORy publ iCaTiOn
11 / 2012
paRTneR in yOuR DigiTal TRansfORMaTiOn
Magenta advisory helps clients create competitive advantage digitally. Our unique approach to management consulting combines business driven analytical problem solving with a deep understanding of the digital ecosystem. We help both global and local top brands in their digital transformation.
E xECuT IVE Su MMARY Digitally Outsmart The Competition During The Recession | Magenta advisory Research03
in this paper, we shed light on how companies can embrace and grow their digital business during an economic downturn. We have picked three typical corporate reactions to recessions and highlight the important role digital plays in not only helping your current business, but also in laying the foundation for future growth.
In this paper, we outline how your company can benefit by investing in digital business today to out-play the competition tomorrow. We recommend companies build their digital and multichannel ca-pabilities during the economic downturn by cutting costs wisely, generating new revenue streams and/or growing internal competences.
Before looking at each of these areas in more detail, let’s first look at why it really matters how you play the game during a recessions.
INTRODuCTION
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euROpe, MaRks & spenCeR is spenDing $400 MilliOn On RelaunChing iTs
e-ReTail siTe, OffeRing Wi-fi in sTORes anD OuTfiTTing
sTORe sTaff WiTh ipaDs.september 7, 2012
i
i DigiTal CapabiliTy builDing DuRing an ORganizaTiOnal COsT-CuTTing peRiOD While the economy is down, companies tend to slash costs across all departments and increasingly take a short-term perspective on investments. Taking advantage of lean development methods and digital solutions such as Software as a Service helps in tackling these issues.
ii DigiTal business MODel explORaTiOn TO COMbaT DiMinishing COnsuMeR spenDing Applicable to most industries, whether B2C or B2B, customers tend to spend and buy less when the economy is down. New digital business models provide innovative means that cater to price conscious customers and expand market footprint.
iii DigiTal COMpeTenCe builDing in an eRa When DigiTal TalenT is laiD Off In turbulent times, companies are often forced to cut costs, leading to lay-offs. Recently these have also included digital professionals – a scarcity in Finland. Companies willing to invest should seize the opportunity to recruit digital talent now when the supply is high and demand temporarily low.
INTRODuC T ION Digitally Outsmart The Competition During The Recession | Magenta advisory Research04
WhaT DO The WinneRs Of ReCessiOns have in COMMOn?As we enter 2013, the global economic outlook re-mains covered in dark clouds. While most associate recessions with losing, every downturn also has its winners. This was also the case in the 1930’s Great Depression. Although many companies lost fortunes and went bankrupt, companies such as Procter & Gamble, Camel and Chevrolet emerged as winners. Whilst there are underlying variables and differ-ent theories to why this was, one thing is generally agreed upon: These companies dared to invest in the future. These companies placed significant sums of money into market-ing and product development when everyone else cut back on spending.
When looking at more re-cent research, similarities can be found from com-panies that survive recessions better. A study by Harvard Business School (2010) studied 4,700 public companies’ performance during the past three glob-al recessions. The results suggest that companies, which either cut costs fast and deep or invest reck-lessly during a downturn, have a lower probability to beat competitors when times get better (see Figure 2). According to the study, the most probable post recession winners are companies that are able to cut costs selectively and focus on operational efficiency, but at the same time invest in the future by spend-ing more on marketing, r&d and new assets.
As we will present later in this paper, digital busi-ness provides a cost-effective means to invest into new assets and market development. However, let’s first look at why digital is our solution for surviving the recession.
Why Can DigiTal business help suRvive The DOWnTuRn?Sooner or later, every downturn is followed by an upturn. Companies that have prepared for econom-ic recovery by wisely divesting and investing into the future, are way ahead of their competitors when the economy picks up. Yet it is not enough to simply invest - companies need to know where to invest.
“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” — Wayne GretzkyAlthough comparing ice hockey to running a
business might be far fetched, the ability to think strategically about your next move is just as applica-ble to both. Digital business might be a fraction of a
company’s business today but its importance both in absolute figures as well as indirectly as a part of an omnichannel customer experience is growing all the time. This is well visible in Figure 3, which compares us retailers’ same store sales and online sales. Since the dip in 2008, nearly all of us retailers’ absolute sales growth has come from digital business ($16bn vs. $1bn). Even more, the growth of online sales has far exceeded that of same store sales for several years.
In order to see if companies that focus on ecom-merce have really succeeded better than others, we com-pared the stock price develop-ment of the top 20 publicly listed online retailers to that of s&p 500 From Figure 4 we can easily see that companies with large online sales have survived the recession better. By mid August 2012, the Top
20 online retailers’ shares were 20 % more expensive than the respective investment in s&p 500 in the beginning of 2008.
The same development is also happening in Europe as can be seen from Figures 5 and 6. First, as Figure 5 illustrates, online share of media spending is growing rapidly and online is quickly becoming the dominant advertising channel. This is mostly due to the fact that online commerce has been also growing rapidly despite the recession, as Figure 6 illustrates.
Another interesting point is how Finland ranks in these comparisons. Finns rank among the most frequent online shoppers, but online share of media spend is still relatively small. This could imply that Finnish retailers are losing a major share of their sales abroad because of a lack of investment in digi-tal business.
This is a good example of how the business envi-ronment has changed dramatically during the last decade. Online pure players and foreign retailers have entered the game and are here to stay.
To generalize, we explain the success of digital-focused companies through three different factors. First, digital-focused companies are able to get a better return on their investments in the short term. Second, digital business enables new business mod-els and expanding sales to new customer segments and geographical areas with relatively small costs. Third, companies that have dared to invest in digital operations during the downturn have been able to cherry-pick the best talents from the market. In the next three chapters we will go through each of these areas in detail.
a gOOD hOCkey playeR plays WheRe The puCk is. a gReaT hOCkey playeR plays WheRe The puCk
is gOing TO be. wayne gretzky
INTRODuC T ION Digitally Outsmart The Competition During The Recession | Magenta advisory Research05
figuRe 2: strategic options for companies during recession
sOuRCe: Adapted from Harvard Business Review 2010
figuRe 3: us retailers’ same store sales vs. online sales
sOuRCe: Internet Retailer 2012
Promotion-focused moves
Market development
Asset investment Both
Pre v
e nti o
n -fo
cuse
d m
ove s Employee
reduction
Operational efficiency
Both
+13% +12.2%Sales growth EBITDA growth
+3.3% -5.2%Sales growth EBITDA growth
INTRODuC T ION Digitally Outsmart The Competition During The Recession | Magenta advisory Research06
figuRe 5: (left) Online share of all media ad spend and growth
figuRe 6: (right) people with last online purchase in the last 3 months
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
2005 2006 2007 2008 2009 2010 2011
People with last online purchase in the last 3 months
FINLAND
UK
EU-27
SWEDEN
ITALY
15,2 %
15,9 %
15,9 %
16,2 %
20,6 %
21,4 %
21,7 %
23,4 %
24,9 %
27,9 %
27,9 %
35,9 %
Italy
Finland
Russia
Poland
France
Germany
Europe average
Sweden
Norway
Netherlands
Denmark
UK
Online share of all media ad spend 2011
+14 %
+15 %
+13 %
+6 %
+14 %
+11 %
+9 %
+23 %
+56 %
+8 %
+16 %
+15 %
Growth
sOuRCe: Eurostat 2012sOuRCe: IAB Europe, Adex Benchmark 2011
figuRe 4: stock price performance of Top 20 us e-tailers vs. s&p 500 index
sOuRCe: Google Finance, Internet Retailer’s Top 500 list 2012
-45 %
-30 %
-15 %
0 %
15 %
30 %
45 %
2008 2009 2010 2011 2012
Top 20 US publicly listed e-tailers vs. S&P 500
TOP 20 E-TAILERS
S&P 500
Top 20 e-tailers:
Dig
ital m
onet
izat
ion
gap
All the companies in the Top 20 index are equally weighted on 2nd January 2008
CHANGE IN %
C ASE STuDY I – NOR DSTROM Digitally Outsmart The Competition During The Recession | Magenta advisory Research07
founded in 1901, nordstrom is an upscale department store operating 234 brick-and-mortar stores in the us and with online sales to several coun-tries worldwide, including Finland. Nordstrom has been able to weather the recession better than most of its competitors by making a series of smart investments to sustain growth.
In 2005, Nordstrom’s online sales constituted 5.7 % of overall revenue and the company stated that 10 % would be a tough figure to get beyond. During the economic turmoil in 2008, the company’s overall sales declined 4.3 % whereas online sales kept growing at double-digit figures. This was the point when the company decided to start investing heavily in e-commerce.
Nordstrom’s success in recent years hasn’t come by coincidence. First, the company invested in integrating inventories between warehouses and stores. In practice this means that when one orders a product from the online store in San Francisco, it can be dispatched from a department store in Manhattan. This buy anywhere, fulfill anywhere mentality enables Nordstrom to sell products from stores that have excess inventory, mini-mizing the need to mark down items at the end of the season. The integra-tion has resulted in record setting warehouse turnaround times (from 4.8 in 2005 to 5.6 in 2011).
Second, to increase sales when consumers are cutting on spending, Nordstrom acquired flash sales site HauteLook for $180 million. Whereas other department stores have tried to build their own flash sales sites with minimal success, Nordstrom minimized risks by acquiring an already estab-lished business.
Third, Nordstrom has invested heavily in its e-commerce platform. During the next five years, the company plans to use one-third of its capital expen-ditures, in other words $1 billion, in e-commerce.
With these investments, Nordstrom has been able to get ahead of its competitors in otherwise difficult times. Today, online sales already make nearly 10 % of the company’s revenue and are growing 30 % a year. In 2012, the company is expected to make over $1 billion online. The double-digit growth in online business and stock value hitting new heights is showing that Nordstrom is on the right track.
Case i
DIG ITAl C ApAB I l IT Y Bu I lD ING DuR ING AN ORGANIz AT IONAl COST- CuT T ING pER IOD Digitally Outsmart The Competition During The Recession | Magenta advisory Research08
i DIGITAl CApABIlITY BuIlDING DuRING AN ORGANIzATIONAl COST-CuTTING pERIOD
during times of economic struggle, companies are often put under intense pressure to cut costs across the board and somehow maintain profitable opera-tions to keep shareholders happy. It is undeniable that costs often do need to be cut, but these cuts should be made in the correct places. Bearing in mind the importance of digital capabilities in the fu-ture, cutting back in this area would be questionable.
In addition to having to cut costs, companies are often pressured to change their investment focus. In times of downturn, investment behavior is often focused on short-term portfolios with quick return-on-investment, while more unknown areas such as digital are perceived as too risky.
We offer two pieces of advice for cash-strapped companies that are looking to keep costs minimal and obtain a short-term focus for their investments, while still taking into account the role of digital
business: Start utilizing lean thinking and leverage opportunities provided by digital outsourcing such as Software as a Service (SaaS).
Lean development should not only be seen as a method for software development, but more of a mindset. In brief, lean development involves devel-oping and deploying a simple version of a business solution as fast as possible before developing it fur-ther or developing a new feature. Therefore, com-panies that don’t have a lot of capital to invest can still continue their product development efforts by starting small and expanding them later on.
Companies that have used this technique in the past include Groupon, Twitter, Facebook, Instagram and Dropbox. A more detailed description of a typi-cal lean process can be seen in Figure 7.
Using lean development provides two main ad-vantages that are especially worthwhile in difficult
figuRe 7: example of lean business development
sOuRCe: Eric Reis, Magenta Advisory Analysis
PLANNING CONCEPTCAPABILITY
DEVELOPMENTPRODUCT SCALING
• Defining product vision
• Defining KPI metrics and objectives
• Minimum viable product definition for testing idea
• As little functionalities as possible
• Only provided for limited number of customers
• Developed with lean methodology
• Business unit involved on daily basis
• Maximum 6 months development time
• Continuous development of operating model and functionalities on basis of KPIs
• Monthly iterative version releases developed iteratively
• Business unit involved on daily basis
• Product scaling decision made when KPI objectives met
• Developing scalable IT system with lean methods
• Defining scalable operating model
• Broad usage across organizations
• End user training
MINIMUM VIABLE PRODUCT
ITERATIVE DEVELOPMENT
= Milestone
DIG ITAl C ApAB I l IT Y Bu I lD ING DuR ING ORGANIz AT IONAl COST- CuT T ING pER IOD Digitally Outsmart The Competition During The Recession | Magenta advisory Research09
figuRe 8: how companies achieve cost-savings by utilizing saas?
times. First, lean development enables faster time to market, as beta versions of a product can be re-leased a long time before the actual version is ready for release. Early adopters are likely to start using a product that is in its early stage even if it still isn’t a perfected product.
Second, lean product development decreases both capital and operational expenditures. This is because lean development doesn’t require committing to large investments with long timelines, but empha-sizes cutting down product development to smaller pieces. After each step decisions can be made about the next steps based on whether they deliver enough return on investment or not. In addition, waste is eliminated in project work because features are typi-cally not developed until it is absolutely necessary.
Having looked at how to provide short-term wins with more efficient development techniques, let’s now look at how costs can further be decreased concretely by utilizing digital outsourcing. We have picked SaaS as an example.
SaaS is a third party hosted software that a com-pany can use and pay only for the amount of actual usage. From a company perspective this means that investments needed to start a venture are small. If the investment doesn’t prove viable, the service can be terminated on a short notice with minimal in-vestments having to be made. In turn, if the project proves that there is profit to be made, the service can be easily scaled up or even insourced. The risks and investment levels remain small compared to the opportunity that is present. In Figure 7, we can see how large global companies have started using SaaS to save costs.
By utilizing SaaS, companies are able to decrease their capital expenditures (capex) and move these costs into operational expenditures (opex) at the rate at which the software is used. In times when both investments and risk-taking is low, this pro-vides an opportunity to develop digital capabilities otherwise seen as too risky.
sOuRCe: Amazon Web Services, Google Apps
• Silicon Valley based airline Virgin America moved their corpo-rate e-mail into the cloud in 2010 by utilizing Google Apps
• Migration will cut e-mail system costs by approximately half on an annual basis
• long-term storage benefits of move into cloud will save them over 18 terabytes of space
• Multi-national transaction facilitator Global Blue implemented Amazon Web Services due to capacity issues caused by rapid growth in online refund issuing business
• Move resulted in cost savings of 800,000 uSD in CApEx and 78,000 uSD in OpEx
• Other realized advantages include increased speed and capacity
• location-based social network Foursquare implemented Amazon web services to perform analytics across 5 million + daily check-ins
• Implementation resulted in cost savings of 53% compared to self-hosting, while still maintaining scalability needs
• Other advantages include decreased data processing time without having to develop new applications or add risk
C ASE STuDY I I – G I lT GROupE / A IR B NB Digitally Outsmart The Competition During The Recession | Magenta advisory Research10
gilt groupe was launched during the economic turmoil of 2007. The timing couldn’t have been better, as the founders predicted correctly that during a recession consumers would be intrigued by the idea of buying high-end branded products for 50-70 % cheaper prices.
The business model utilized by Gilt, also known as flash sales, was originally introduced by a French company called Vente-Privee. It is based on buying a large quantity of products and selling them within a limited time frame (in Gilt’s case, 48 hours). In times of decreasing demand, many manufacturers are will-ing to get rid of their extra stock even if it has to be sold at a lower margin. Gilt, in turn, is able to sell those products with a lower price tag than other retailers, therefore attracting a large audience.
Gilt Groupe originally launched only for women, but as the concept proved successful, the company quickly expanded to menswear and home furnishing. In 2011, Gilt Groupe’s rev-enues were estimated at $500 million and the company was valued at $1 billion.
Case ii
C ASE STuDY I I – G I lT GROupE / A IR B NB Digitally Outsmart The Competition During The Recession | Magenta advisory Research11
airbnb, launched in 2007, is an online service that matches peo-ple looking for accommodation with those for rooms to rent. Due to increased price sensitivity, consumers have quickly found the service as an alternative to staying at hotels.
Airbnb’s business model is an adaptation of eBay’s popular consumer-to-consumer marketplace. The company has simply translated eBay’s business model to the travel industry by offer-ing accommodation from people to people. Airbnb’s role is to act as the marketplace, providing a platform for secure reserva-tions and transactions. In addition to general C2C sites such as Craigslist, Airbnb provides a money-back guarantee for guests and an insurance of up to 700,000 € for hosts.
Currently, Airbnb gets 43,000 nights booked every day, out of which ¾ are first time bookers. The company made an estimat-ed $52.8 million in revenue in 2011 and is valued at $1.3 billion.
DIG ITAl BuS INESS MODEl E xplOR AT ION TO COMBAT D IM IN I SH ING CONSu MER SpENDING Digitally Outsmart The Competition During The Recession | Magenta advisory Research12
during economic downturns, customer spending tends to decrease and customers tend to become more price sensitive and start opting for cheaper al-ternatives. This decreases the demand for more up-scale products and services.
When the market isn’t growing, companies must either increase existing customers’ share of wallet or expand to new market segments. Digital busi-ness provides two different solutions. First, com-panies can incorporate new digital business mod-els into their business. Second, companies can use cost-effective market entry models enabled by digital services.
hOW TO CaTeR TO The MORe pRiCe-savvy COnsuMeRs?First, increasing existing customers’ share of wallet can be a strenuous task when consumer spending is going down. As Case 2 illustrates, digital provides new innovative business models, such as flash sales, consumer-to-consumer marketplaces and group sales, to overcome this challenge.
Although originally introduced by online pure players, traditional retailers are also able to utilize these models in their business. For example, Gilt Groupe created a new flash sales online business model to enable high-end brand manufacturers to sell products to price-conscious consumers that would be otherwise left to stock. Traditional us re-tailer Saks Fifth Avenue followed in 2011 by intro-ducing its own flash sales site Saks FASHIONfix.
DIGITAl BuSINESS MODEl ExplORATION TO COMBAT DIMINISHING CONSuMER SpENDING
Since directly imitating a business model from an online pure player might not always be the best strategy, companies can also make use of business models in other ways. First, companies can local-ize an existing concept to their own market where it isn’t present. A good example of this is Sanoma Group’s owned Offerium, which is a localized ver-sion of Groupon. Second, companies can apply an existing concept to other industries. This is what, for example, Airbnb has done by introducing the c2c marketplace to booking accommodation.
hOW TO use DigiTal as a plaTfORM fOR inTeRnaTiOnal gROWTh?Digital offers companies the possibility to utilize cost-effective market-entry models. For example, companies who are not yet selling their products globally can utilize e-commerceto expand their reach abroad. While far from a “walk in the park”, selling abroad through an online store is a smaller investment compared to opening new brick and mortar stores in several countries.
Some companies have decided to outsource e-commerce back-end operations when expand-ing to multiple markets to decrease risk. Investing in customer care, logistics and finance can be ex-tremely heavy with localized customer prefer-ences and legal constraints. Case 3 goes through how William-Sonoma outsourced its e-commerce back-end operations.
ii
C ASE STuDY I I I – W Ill IAMS -SONOMA Digitally Outsmart The Competition During The Recession | Magenta advisory Research13
Williams-sonoma is an american high-end retailer of home furnishing and kitchenware founded in 1956. It operates 576 brick-and-mortar stores around the us and owns brands such as Pottery Barn and West Elm.
By 2007, Williams-Sonoma had mainly grown by investing in new brick-and-mortar stores and acquiring some of its competitors, such as pottery Barn in 1986. In 2008, when the stock market crashed, the company re-corded comparable store sales of -17 %, being one of the worst years in the company’s history. In the same year, sales in the online channel were
down only -6 %, generating more than $1 billion of the total revenue.
In 2009, the company made a strategic shift to use brick-and-mortar stores mainly as showrooms and make its online store the primary sales channel. This enables the company to save on property costs, as fewer square feet are needed as well as to decrease inventory levels. This was also the first year that the company started closing down its brick-and-mortar stores.
During this time, Williams-Sonoma has closed down several brick-and-mortar stores and online now accounts for nearly 40 % of all revenue.
With the help of online commerce, Williams-Sonoma was able to star t selling its prod-ucts internationally in 2011. To minimize the investment and risks, it buys ser vices from FiftyOne, a company specialized in international expansion of e-commerce. FiftyOne takes care
of currency conversions, duties, returns and postal regulations in dif-ferent countries. Now Williams-Sonoma is selling its products to over 100 countries.
Case iii
Outsourced
Marketing
Merchandizing
Site Content Management & Operations
Order Management & Finance
Logistics
Product Management
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DIG ITAl COMpE TENCE Bu I lD ING IN AN ER A WHEN D IG ITAl TAlENT I S l A ID OFF Digitally Outsmart The Competition During The Recession | Magenta advisory Research14
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DIGITAl COMpETENCE BuIlDING IN AN ERA WHEN DIGITAl TAlENT IS lAID OFF
be it through company acquisitions, headhunting or direct steals, global companies fight for digital tal-ent because they know it is a scarcity. Digital talent is as hard to find for cxo-level positions as it is for operational smes.
“…there is a war for talent. This industry is one hot industry…We want to attract the best and the brightest.” — Peter Sachse (chairman of Macys.com until February 2012)
If finding the best and brightest digital talent is difficult in the us – it’s even harder in Finland. The current recession however provides a unique time to grab talent other companies have laid-off.
Why is finDing anD ReTaining DigiTal TalenT sO iMpORTanT?Translating your digital strategy into efficient digital operations requires not only the underlying tech-nology but also processes and people to run the day-to-day business. Thus, how you recruit and retain talent to build your company’s digital dna is vital in how you succeed in your chosen digital strategy.
While new competences are needed for digital organizations, companies often hesitate to allocate budgets to its headcount. More often than not, digital organizations are severely understaffed
because digital investments are technology focused. The underlying assumption is usually that digital business runs itself. Top management should always remember to align sales targets with headcount allocations as Figure 9 illustrates. Alike any other business, digital business requires competent people to maximize performance.
hOW DO We knOW WhaT TalenT We aRe lOOking fOR?Organizing digital operations to deliver digital strategy is a fundamental starting point in digital transformation. There is no single way to organize, but what is important is that you select a model, which suits your selected strategy, targets and cur-rent organization the best. In Figure 10 we present three typical structures to organize digital business in organizations.
Companies should also bear in mind that suit-ability of different organization models change as digital maturity evolves. For example, a company may choose to have digital talent scattered across the organization at first, then decide to create a digital center of excellence and finally, implement a hub and spoke model.
iii
DIG ITAl COMpE TENCE Bu I lD ING IN AN ER A WHEN D IG ITAl TAlENT I S l A ID OFF Digitally Outsmart The Competition During The Recession | Magenta advisory Research15
figuRe 9: (on left) average e-commerce team headcount based on company’s online revenue
sOuRCe: Adapted from Forrester Research 2012
23 peopleaverage eCommerce team headcount when online revenue under $10M annually
78 peopleaverage eCommerce team headcount when online revenue $10 M – $150 M annually
Decentralized
Centralized
shared service
Digital DigitalDigitalDigital
Digital
Digital
sOuRCe: Forrester Research 2009
figuRe 10: (on right)
Different ways to organize digital operations
hOW DO i builD a DigiTal ORganizaTiOn, OuR COMpany’s DigiTal Dna?
i Assess and select which digital organizational model is suitable for your digital business. Consider digi-tal objectives, analyze these against various organizational models and select the one with best fit.
ii plan organizational teams and their ways of working. Consider what teams are needed, their responsibil-ity areas, deliverables, interfaces to others in the organization and how they will be measured.
iii Decide what roles are required within each team, how many em-ployees are required, what will be their responsibility areas and what type of capabilities are required.
iv Decide which roles you want to keep in-house and which to out-source. As in any business, consider what should be at the core of your competitive advantage and keep that inside your company, outsourc-ing non-core roles. As an example, a retailer will definitely keep its pur-chasers inside the organization but
might want to outsource its online content production – for a branded consumer goods company content marketing and high quality content production may be a top priority for internalization.
v Recruit and retain digital talent! As always, recessions lead to lay-offs throughout organizations. This can be also seen as an opportunity as it means that there are plenty of tal-ented people on the market. Now is therefore a unique time to build digital competences.
C ASE STuDY IV – SANOMA Digitally Outsmart The Competition During The Recession | Magenta advisory Research16
sanoma is a european media group with a portfolio of digital, learning, news, magazine and tv activities. With 11,000 people in some 20 countries, it is one of the leading companies in its industry.
As many media companies with a long history in printed press, Sanoma long held the belief that traditional media won’t lose its share to digital media. In 2011, however, with declining revenues from its printed products, Sanoma placed digital as one of its strategic focus areas. This has meant several changes in the organization.
First, the company decided to change its organization structure so that in addition to seven business units, there are two horizontal units, digital op-erations and customer market operations. This change was done to ensure that digital business expertise could be utilized throughout the organization.
Second, they started to build their digital center of excellence by aggres-sively recruiting digital talent from an array of industries. The company also appointed its first ever Chief Digital Officer, reporting directly to the ceo.
The results of the shift in strategy are already starting to show. In the first half of 2012, Sanoma’s online sales (excluding TV and radio) grew by 20.9% to €115.8 million, accounting for 9.7% of the group’s net sales.
sample of digital positions sanoma has been recruiting in 2011/2012Director Consumer Marketing & Sales Feb 2012Graphic designer April 2012Digital Marketing planner May 2012Digital planner May 2012Head of Online Analytics and Insights Feb 2012IT Manager Nov 2011
Case iv
HOW MAGENTA ADV I SORY C AN HElp YOuR ORGANIz AT ION? Digitally Outsmart The Competition During The Recession | Magenta advisory Research17
Magenta advisory helps both top management and operative teams cre-ate competitive advantage digitally. Be it strategy creation or continuous optimization of digital business operations, we commit to helping our clients become digital leaders. Magenta Advisory can help your company in its’ digital transformation to outperform the competition.
In Figure 11 we have selected a sample of services we offer across a clients digital transformation.
We believe in building long-term relationships with our clients to work with them throughout their digital transformation. Our clients choose us and stay with us because:
• We are leading experts in digital and multichannel business• We understand digital channels should be business and facts driven• We have a track record of helping our clients succeed• We understand both multinational and local brands• We deliver results
HOW MAGENTA ADVISORY CAN HElp YOuR ORGANIzATION?
STRATEGY CONCEPTCAPABILITY
DEVELOPMENTBUSINESS
EXCELLENCE
Vision and mission definition
Strategy definition
Target setting
Strategy roadmapcreation
Business model definition
Business case creation
Competitor analysis
Business concept definition
Customer valueproposition design
Best practice benchmarks
Business requirements definition
Detailed business case creation
Program planning
Vendor selection
Program management
Program audits
Use case definition
Operating process creation
Organization design and ramp-up
Training & change management
Management for hire
Key performance indicator definition
Business performance analysis
Performance management establishment
Development roadmapping
CONCEPT CAPABILITIES
figure 11: sample of Magenta advisory services
ABOuT THE AuTHOR S Digitally Outsmart The Competition During The Recession | Magenta advisory Research18
Mia folkesson is a Partner at Magenta Advisory. Mia is a leading expert in digital business transformation, digital capability building and operational excellence. Mia has a background in successfully driving complex international digital business transformations.
[email protected]+358 400 377 170
Juho ullakonoja is a Consultant at Magenta Advisory. Juho is a business development specialist focusing on digital marketing and sales with industry experience covering re-tail, telecom and consumer goods industries.
[email protected]+358 40 757 1001
eemeli Metsäntähti is a Consultant at Magenta Advisory. Eemeli is a business development expert focusing on digital business transformation with a background in business technology.
[email protected]+358 50 346 2920
ABOuT THE AuTHORS
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