This week’s podcast is about the human capital part of the digital operating basics. Specifically, DOB5: Leadership and management and DOB6: People, Culture and Teams. Middle Eastern retailer is a good example of a company that has been focusing on this area.
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From the Concept Library, concepts for this article are:
- Operating Performance = Smarter, Faster, Better
- DOB5: Leadership and Management
- DOB6: People, Culture and Teams
From the Company Library, companies for this article are:
- Majid Al Futtaim
Welcome, welcome everybody. My name is Jeff Tausen and this is the Tech Strategy Podcast where we dissect the strategies of the best digital companies of the US, China and Asia. And the topic for today, Lessons in DOB 5 and 6 from Majid Al-Futain, DOB Digital Operating Basics. 5 and 6 being about leadership management, that’s number five. Number six is people, culture and teams. I haven’t really talked about these two very much. They’re incredibly important, but it tends to be a bit soft and fuzzy and hard to get into. And then I was reading a Harvard business case study about Majed Al-Futain, which I’ll explain to you if you don’t know that company, Middle Eastern Company. And they really struggled with exactly those two points for several years. So I thought it was sort of a great case study for that particular dimension of digital strategy. So I’m kind of filling in a little gap that I’ve been glossing over for the last year. And let’s see, some housekeeping stuff. Part four of Motes and Marathons is up on Amazon right now. Ebook and paperback are both there. Part three has been up for a while, but the paperback wasn’t. You could only get it on Barnes and Noble. I’ll try and put the paperback for part three up on Amazon this weekend, next day or so. So in theory, One through four, all done, ebook, paperback, Amazon, easy to find. Number five is in the works, which is I think gonna be the last part. I think that’s most of it, so I’m gonna try and finish that up this month. Let’s see, other stuff. For those of you who are subscribers, I sent you a couple articles about Web 3 business models, which is kind of an emerging topic. I’m really trying to get my brain around that still. I’m gonna send you one more of that, so that’ll be sort of a three-part series on how to think about Web 3, the big concepts that matter, and also the business models that are clear, at least at this point, in terms of, these are the ones that are pretty powerful. I mean, basically what I’m doing, if we had done the same exercise for Web 2, the YouTubes 15 years ago, the key concepts that you would have wanted to pull out were something like network effects. This is going to be the big gun within this sort of business strategies if you can build a network effect. So look for companies that have those. I’m basically doing the same thing for Web3. I’m looking for the big gun such that if I see a company starting to put that together, and it looks like it’s basically composability at global scale. That’s sort of my working hypothesis. That would be the company to keep an eye on. So that’s kind of what I’m doing is preliminary business models, preliminary concepts that really matter. and hopefully you can identify the winners, which is what I’m trying to do. Okay, and I think that’s it for housekeeping stuff here. For those of you who aren’t subscribers, you can go over to jefftowson.com, sign up there, free 30 day trial, see what you think. And my standard disclaimer, nothing in this podcast or in my writing or website is investment advice. The numbers and information for me and any guests may be incorrect. Views and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment advice. Do your own research. And with that, let’s get into the topic. Now there are really two, let’s say 2.5 sort of concepts for today, which are obviously in the concept library. Uh, first one, I don’t really have a name for this. I just call it smarter, faster, better. If you, um, when you look at doing the digital operating basics, you know, taking the core management and the core operations of a business and making them more digital, which a lot of companies are doing. Some are born that way, the internet companies. A lot of them are transforming, which is actually very, very difficult. You know, there’s a lot of talk about, oh, this is gonna make you agile, and you have to be data-driven, and you have to be quicker, because the world quick is fast, and you have to be adaptable. You hear all these words. If you look at my sort of six levels diagram, you’ll see sort of Warren Buffett at the top three levels, Elon Musk at the bottom three levels. The top levels are all about structural advantages, the bottom three levels are about operating performance. And you got to win on both levels. You got to have a fast horse and you got to be a good jockey. Within the Elon Musk, the operating one in a digital first company, I’ve basically put there, look, just smarter, faster, better. When you go digital look as a company, that’s what’s supposed to happen. You’re supposed to get a lot smarter, data-driven. Management can see everything. Everything is tracked. You’re just a smarter company. You’re supposed to get faster. Decisions are made quicker. You push decisions down to lower level people. You give them one common database as a single source of truth. The company’s just quicker. And then last one is just better. you are continually improving. You’re always adding to the customer experience. You’re always getting better. And that’s what companies like Amazon do. Every year, they’re smarter, they’re faster, and they’re better. So that’s kind of my simple version of the entire bottom of that graphic. And a lot of people break that out. I think, and people say, oh, this is gonna be a big advantage. I think it’s just table stakes. I think any business is gonna have to be this way. The idea of getting monthly reports and launching a new product after nine months worth of market studies, that’s going away. Data is real time. You’re launching products all the time. You’re making changes all the time. That’s smarter, faster, better. That’s concept number one. It’s not really a concept. I suppose it’s just a point. The two big concepts would be DOB5, DOB6, which is digital operating basics five, which is leadership and management. and digital operating basic six, which is people, culture, and teams. Because once you start building out the digital operating basics, you’re building your digital core, you’re becoming more connected, you’re going for scale, you’re doing continual improvements and personalization, things like that. Okay, that’s all fine. Who’s doing it? I mean, you need in a lot of these companies really massive changes in your human capital. You need different people. You need software people. Most traditional businesses that go digital don’t have those people. And they can’t get them for the most part. So they use vendors and you basically end up doing a lot of internal training as the, you know, pretty much the solution for most companies, which is what I do as a professor. But then it’s also about culture. It’s all about how do you, and then let’s say we could also talk about organizational structure. Do we have a hierarchy or do we make a lot of teams? And The standard solution, which would be DOB6, People Culture Teams, the standard solution at most companies like Google and Amazon is, they have a very unique culture, they empower their people, they have a lot of human capital, which is arguably their greatest asset, and they operate almost entirely in team structures. Lots of teams running around doing quick projects, making decisions, implementing, then reconstituting in new teams. That seems to be how they sort of split the difference between having the advantages of a big company but also having sort of the nimble entrepreneurial advantages of a smaller company. The go-to solution seems to be teams, teams and culture. Now DOB 5, leadership and management, okay that’s governance, that’s board, that’s senior management, that is a different set of skills. And I’ll give you this Majid Al-Futain case. A lot of this stuff does not happen until you get the right people at the top. Because even if you just get one CEO who’s like, we’re going to go digital, and then after three years of spending a lot of money, five years, that person gets replaced. And what if you have to cannibalize one of your current businesses, or you have to build an online channel that wipes out your offline channel. If you don’t have sort of the management and leadership on board. It’s very hard to do this stuff and take all the pain you have to take. And getting them to agree, one, you should never do that. If you’re ever going to digitally transform a company and the board says, yes, we approve, that can get you fired. It has a lot to do with what is their level of expertise. If you’ve got a board who doesn’t understand this stuff, when things go wrong, which they will, they’re… go-to solution will be to fire you. You need a board that understands all this stuff and sticks with you. So anyways, that sort of DOB5, DOB6, and I’ll sort of give you a case study of a company that went through all this. But there’s entire books written about this, management books about how to organize for digital, how to build culture, how to lead with purpose. I mean, there’s a whole, it’s a massive subject. And I generally don’t talk about it very much because I’m much more into sort of structural. advantages. And with that let’s talk about this company Majid Al-Futain. Well, let me go back to the six levels again. If you look at the six levels, and I’ve put the graphic in the show notes, you know the top three are about structural advantages, competitive advantages, motes, all of that. The bottom three are about operating performance. Elon Musk is the example I use. Okay, when you actually start thinking about how to build a digital company or how to assess a digital company that’s going to win, it’s usually, in my mind, it’s 30% structure, 70% operating performance. That’s kind of how I break it down. You can make a lot of analogies for structural advantages like… your horse is faster than their horse. A better analogy would be like, look, some companies are airplanes, some companies are cars, some companies are bicycles. If you’re in a car or an airplane, you’re probably gonna beat the bicycle. That’s structure. When you get to the operating performance, well, that’s tactics, digital operating basics, and then what I call digital marathons and superpowers. That’s a lot fuzzier. You have to sort of tease that out a lot. But really management and culture cut across all of those. Do you have a culture that is incredibly good at tactics, that can respond to your competitor within hours, that can respond to market changes within days? How fast, are you creative? Are you coming up with new growth hacks and new clever ideas all the time? So the culture and management sort of cut across all three levels. And then the simple assessment is smarter, faster, better. And you can actually measure that. If you look at three companies within the same space, Coke, Pepsi, I don’t know, Dr. Pepper, I think Coke bought them actually. You can actually look at who is smarter, who is faster, and who is better. You can kind of assess those things. How often do they launch new products? How quick can they make decisions? How fast are they improving the customer experience? You can actually make assessments of smarter, faster, better. It’s actually not as hard as you think it would be. Okay, so we break it down that way and that brings us to the digital operating basics, which is overwhelmingly what Majid Al-Futain was looking at. Now this comes from a Harvard business case. I was doing this one with some MBA students a couple months ago and I thought it was just a good example of this because they don’t really talk about tactics at all in this case and they don’t really talk about structural advantages, which I think is a big mistake. Like, if you’re going to go through all this pain to transform. It’s a lot better to know what winning looks like while you’re doing it. Look, we’re gonna do all this transformation, we’re gonna build capabilities, we’re gonna build our digital core, and this is the business model we’re moving towards because if we can build that business model, that structure, it’s game over. That’s really what you want, and this is what I talk with companies about because they will often hire people that do digital transformation, and I’ll come in and say, look, do you even know what winning looks like three to five years from now? I’m kind of in the business of figuring out what that looks like. So Majed Al-Futain, for those of you, I assume most people don’t know what this is. This is a very common type of business. This is a big retailer out of Dubai in the Middle East, but has since expanded up to like Azerbaijan and down to Kenya, which is the big retailer’s… traditional companies of the Middle East, which are usually founded in the 70s. You know, Saudi Arabia didn’t even have roads between the major cities in like 1970, but they come out of Saudi, they come out of Dubai, they come out of Abu Dhabi. The ones out of Abu Dhabi and Dubai tend to go international because their domestic markets are quite small. Saudi Arabia, Egypt, they tend to stay domestic because they actually have a fairly large domestic market. Anyways, This is your standard retailer. We’re gonna build a hypermarket. We’re gonna build a shoe store, Bata. We’re gonna build a restaurant, KFC. Now, we can see versions of, and then from there, they tend to go into larger hypermarkets and then shopping malls. And we see a version of this company, we see them in Indonesia, we see them in Thailand, any sort of smaller developing economies. It always looks the same. It’s always the local player who is usually good at getting land and is usually doing construction and doing development, but doesn’t have the brands. And their market isn’t big enough to say, I’m going to build my own version of Walmart. So what they do is they cut a deal with usually a Western company, but sometimes Japanese, and they’ll cut a deal with Carrefour. So we see this in Thailand, we see the big real estate companies. that build beautiful shopping malls and then they also have the Tesco brand for a long time or they have the KFC. Well that’s kind of Majed Al-Futim. They did shopping malls starting out of Dubai. They expanded and most of their business ended up being the Carrefour business for that part of the world. Not off the look at the map, pretty much not counting Saudi Arabia which was another group. Anyways. We kind of, and then they go from there, they might add some smaller restaurants and things. So there’s sort of 50% a real estate shopping mall developer and 50%, you know, this cross border partnership thing. Pretty common, we see it all over the world. It’s pretty good business. And it was founded by Mr. Majid Al-Futain in the 70s, you know, typical Middle Eastern organizational structure, which is there’s a shake, the shake makes all the decisions, everyone reports to the shake. And then they have, as the shake gets older they have to hand off the reins usually through a family office to someone else either the next generation or as likely they’ll hire professionals. And they transition from a one person show with a family office to a more professional structure. And that’s pretty much what happened with Majidel Futem in 2015. A CEO was hired, ex-Mackenzie, comes in 2015 and that’s when this time, and he’d already been there. couple years before. I’ll give you some more details in a minute. But he’s the one who starts to say, look, we’ve got to start talking about digital transformation. We’re a retailer. Retail is going omnichannel. It’s going digital. We can’t be this way anymore. In terms of companies that have to go digital, it’s retail, it’s CPG, it’s entertainment, it’s media, it’s financial services. Those people cannot avoid this question. Healthcare and other sectors, yeah, you should probably do it, but you don’t got to do it right now. These sectors, you’re at the center of the action. So, okay, so you start to think about how do we digitally transform and take this traditional business, which is a lot of people who are good at real estate, they’re really good at opening stores, they know how to manage inventory, and they know how to hire tons and tons of Filipinos, because that is usually who staffs all these stores in the Middle East. I’ve actually done that before. I’ve gone from the Middle East out to the Philippines and you hire people. We used to hire a lot of nurses and stuff. It’s actually a fun trip to do recruiting trips into the Philippines if you’ve never done it. But okay, so you have this question of how do we transform? Is it top down? Is it bottom up? Is it required? Or is it just something we should do? Is it a burning platform? What’s gonna be difficult? And usually within that, The strategy is not that hard to figure out, you can call people. It’s the people and the cultural transformation, especially when you’re somewhere like the Middle East. I mean, you really think you’re going to hire thousands of software people? It’s hard to get software people. It’s hard to get them to come to the Middle East. The Middle East has a very small, the Gulf, not the Middle East, Middle East, but Gulf So people is almost always going to be your most difficult problem. And so when I talk to companies like this, I’m usually doing one of two things, often both. Which is one, let’s talk about what winning looks like. Here’s the business model you want to build. You know, and if you have any questions, read my five books on how to build motes in Marathon. And then the other thing is, okay, you don’t have the people you need to do this. And your management doesn’t understand anything about this stuff. So you can try to hire people, but it’s going to be very expensive and very difficult, and it’s probably not going to work too well. Or we can start training your people to become software people. Oh, and by the way, I’m a professor. Let me pitch you a training program. So I’m kind of wearing the consulting hat and the training hat, which actually they go together quite well. Okay. So here’s some factoids about Majid al-Futaym. For those of you who haven’t been to Dubai, Dubai is… People like Dubai because it’s so pretty and it’s so clean and it is nice, but it’s always kind of never been my place. It always feels a little bit like hanging out at the shopping mall. Not a lot of culture. I was always much happier in Beirut before it kind of went crazy. Anyways, Dubai is one of your seven Emirates in the United Arab Emirates. It unfortunately… Well, maybe fortunately, it ran out of oil before the others. Abu Dhabi has a lot of oil today, Dubai ran out. So what did Dubai do? Well, they had to get creative and they became a business hub. They’re sort of a support center for Saudi Arabia, to a large degree. The other way I’ve heard it described as if, I think that was John Stewart, he said, if Las Vegas and Saudi Arabia had a baby, it would be Dubai. Anyways, sort of global hub. who work in Saudi Arabia, we used to all fly out of Beirut because Beirut was awesome, like bars and you go skiing, you go to the beach, it’s beautiful. Every now and then, you know, the power plant would get bombed or something and we’d watch the jets come in and bomb the power plant and then we’d have no power for a day. But then, you know, kind of went downhill a bit, more problems. A lot of people, instead of flying in and out of Beirut to somewhere like the Gulf, Saudi mostly, everyone started moving their families to Dubai. and then to Abu Dhabi. And you’d fly now. So if you ever go to the Abu Dhabi airport on a Monday morning, it’s just a ton of guys in suits, all flying to Saudi and their families all stay in Dubai because the women really can’t work that much in Saudi. Banks and a couple exceptions, hospitals, but mostly not. Okay, so Majid Al-Futain, local entrepreneur, you know, he starts building mixed shopping malls. He was one of the first people, this was back in the 90s when Dubai was sort of taking off. He was one of the first to build these international large anchor stores like the Carrefour’s and whatever. He did a joint venture with French hypermarket Carrefour. He opened their first store in the Middle East in Dubai. It’s sort of family center, city center. For those of you who know Dubai, it’s Dira. City center Dira. I don’t know how many. days of my life I’ve sat in that shopping mall. But yeah, and then you add into hotels and things like that. Then you go into movie theaters, 1999. Gann by Joint Venture with an Australian cinema. She’s sort of just sort of vertically go into the shopping center. Then the malls get bigger. Some of them are small. Sharjah, Muscat, Cairo, Alexandria, Egypt. Then, you know, he went really big, which is Mall of the Emirates. Which if you’ve ever been there, that’s, you know, absolutely massive. Pretty cool actually. And then he’s the one who opened the ski slope in the mall in Dubai. You can watch people skiing inside, which is, I’ve always tried to find out like what the cooling bill must be for that, but I was never able actually to find it. Anyways, so that’s kind of what you think. Okay, so fast forward. 2015, Alain Bajani, I’m probably saying his name wrong. Sorry about that. takes over, I think around 2015, as the new CEO, the shake. Majid retires, getting at that age. And that’s when this idea of digital really starts to take off. At that point, the group had 12 different businesses across 15 markets in the Middle East, Africa, Asia, sort of spanning this little part of the world. But a pretty traditional retailer. So he takes over. February 2015. And it’s this idea of, okay, do we need to go digital? It wasn’t a burning platform. They weren’t losing money, but you have to start to think about is your growth gonna slow? Do you wanna get ahead of the curve? Prior to that, he had joined around 2008 as vice president for business development. Prior to that, he met McKinsey for quite a while. So pretty classically trained strategy type person. Anyways, he takes over and it’s his question and they basically decide that they’re going to go digital. And then what happens is over the next three, four, five years, you see just really a series of initiatives, most of which are focused around people. And I’ll give you the short list. So they launch a leadership institute, right? And they basically argue that like, you know, talent development is going to be the key to going digital. So, quote unquote, I’m reading from the case, we started with the people agenda. If we’re going to create the future of MAS, Majed al-Futain, what competencies should these leaders have? So they come up with a leadership model and they start to look at what are the values? How are we going to train leaders? What are the rules? This gets launched April 2015, a couple months after he takes over. How are we going to develop top talent? What is our culture? What are our values? You know, sort of lay it out. So we could call this digital transformation starting from the top down, which is kind of one of the questions I answered. I asked, OK, you have an induction program for new employees. Here’s the values of the firm. Here’s the skills we like you to develop. There’s a leadership development program for the top talent and the senior executives, who you’re identifying the senior people, the top performers. you’re more systematically starting to train them. And that’s sort of, you know, it’s not a bad first step before you start jumping into, okay, let’s do specific training in various things. Sort of, you know, before you get into functional training, okay, let’s just talk about where we’re going and, you know, what we think leaders should look like. That’s not bad. Okay, next thing they do, performance management. Let’s start to measure things. So they develop a team for a framework for performance management because it turns out you ask people what you know how should we be doing what should be doing everyone has a different definition so basically that’s it’s a it’s a tee up to like you create the common language and then you can start to create KPIs now this funny they did 360 degree assessments which if you’re not familiar with those they’re They’re actually pretty great, like I’ve had them done to me, where they basically interview everyone around you, 360 degrees. Everyone you report to, everyone who reports to you, and then everyone who sort of appear. And you often bring someone in from, if it’s a big firm, you bring them in from the other side of the planet, so they don’t know anybody. And the feedback you get in a 360 degree review is really humbling. but really helpful because you hear a lot of stuff that people will tell you that I didn’t know I did that. It’s very deal. It’s humbling, but it’s actually pretty great. So they do this sort of 360 degree view and they start, I mean, you can see they’re sort of going after human capital more systematically. What is it good? Okay. So they do this sort of performance management thing. They do what’s called a nine box grid, which is where you start to assess people. How good are they? How good are they likely to be? What is their potential? And you start to identify who’s gonna be the leader. Now, a company like Huawei is outstanding at performance management. They’re very good at identifying who’s gonna be the person five to 10 years from now that’s gonna matter. Okay, so they go into that. From there, they start to get. into digital a bit more, which is all right, the School of Analytics, the School of Analytics and Technology. This is 2016, so it’s about a year and four months after he takes over. Okay, you start to look at, we’re good at building malls, we’re good at building cinemas, we’re good at building car-a-fours, that’s fine. We need to start bringing all this data together. Right now we’re getting into digital operating basics three, core operations, core management. We got all these people coming into our stores, we got them all in the carafors, we got them walking in the shopping malls, we got them buying movie tickets. We need to start bringing this all together. Now the nice thing about retail, at least shopping malls and carafors, well, let’s say shopping malls, you’re not gonna build an app for the shopping mall or the movie theater. So it’s not omni-channel because you go to the mall for that. So it’s really about data gathering. When you start to look at the carafor and the retailers, okay, that’s when you start thinking, in our core operations, it’s not enough to just digitize our current physical retail, we need to build online channels as well. That’s a bigger initiative and it’s more difficult. But they start to sort of at least bring together, you know, data for the first time. They put together this digital data technology thing. They build a center of excellence where you start to collect all the data. You start to compare the data, you start to look for areas of improvement. So we could call this sort of data gathering and analytics, which is then tied to like, you know, just continual small improvements. Okay. But you know, reading this, it’s not working terribly well. Um, one particular problem they had was the Carrefour, which was one of their groups, MAF retail. wasn’t really engaged in this. And that turns out to be 70, 75% of their whole business. So, okay, we’ve talked about the vision, the culture, we talked about performance management. Now we’re moving into more digitizing operations and management. But that usually tees up the next one, which is, look, you gotta start talking organizational structure. If you apply all this stuff top down, but your main retailer, the Carrefour Group, is not really engaged, it’s not gonna work. So these things all sort of tie together. data, people, culture, vision, and organizational structure. It all kind of goes together. So they were saying like at this time, 2017, like the organization is not firing on all cylinders. So they start talking about, think about the group first. You’re no longer the retailer, you’re no longer the movie theater team, we’re all the same group now, and they start to basically do reorganization. So this is… I don’t really do this type of work because it’s just not, I’m better at structure than I am with the softer people issues. But you start to do a reorg. And then the next thing they did, they called Organizational Health Index. This is kind of a McKinsey thing. Like, I think it mostly comes from them. They start to measure your organizational health for its capabilities, for its accountability, for its leadership. I mean, it’s basically a long list of metrics. and then they compare you with other companies. So it’s a performance rating relative to others. So you can start to measure these things. So the organizational health index, and specifically, you get a number. They said in 2018, their OHI score was 74. They said in 2015, their score was 57, so they bumped up. But they said they were particularly low in leadership, accountability, and capabilities, which I assume capabilities is probably digital. So that’s a good metric. As you start to have done the major pieces, we’ve got the values, we’ve got the org, we’ve got the people training, all that. Then you’ve gotta start systematically measuring this stuff and just move it up year after year after year after year. It’s a really good, I think it’s mostly McKinsey, but a lot of people do these sort of ratings. It’s a pretty good tool. Anyway, so that kind of brings you down to 2018, 2019. And then management really starts to talk about we now need, we need to focus on the customer experience and we need to focus on convenience. Right, that’s, now, I mean, my digital operating basics, you can hear all the language, it’s all the same language, it’s just kind of all jumbled together. You know, this is like right out of Amazon’s playbook. Look, we’re doing a lot of stuff. There’s a lot of organizational stuff, we’re doing thousands of activities and processes, we got KPIs everywhere. We need to have a North Star that makes everyone paddle in the same direction. because this is a very complicated organization now. What’s our North Star? Well, our North Star is improve everything for the customer. That’s how we will sort of all align in the same direction is we will focus on that as our fundamental bottom line. And that’s what Amazon does. It’s a very good sort of technique to focus such a large number of people on one objective. And I’ve written a bit about Coupang, the South Korean Amazon JD sort of copy. And they have good language about this too, where the CEO talks about, we are in the business of creating wow experiences for our customers. Which is good language, but it’s the same idea as it focuses everyone on one thing. So that’s kind of, I don’t know if you call that a cultural tactic of value and organizational technique, I don’t know, but. So anyways, that’s kind of what you hear. And the last thing that came out of this. was they basically launch an academy. And we are gonna systematically train digital people. We’re not gonna like take our current people and just send them to classes or try and hire people. One of our core capabilities has traditionally been we know how to open stores. Well, one of our core capabilities now is we systematically train people to be digital leaders. and rather than trying to hunt around, we’re just gonna become, we’re gonna produce them ourselves systematically. Hence, we’re gonna launch an academy internally. And that’s an interesting way to think about it. Like if you’re a, let’s say a hire or a agree or one of these big manufacturers, your main facility, your main asset is your factories. And what you really wanna think about, no, our main assets are factories and to school. Producing these people, producing human capital, is as important as producing the washing machines. We are equally dependent on both as a digital first company. So it’s really becoming kind of an interesting core capability that a lot of these companies are basically becoming schools. Because you have to. And that’s what, you know, Maja did is they basically built an academy and they’re going to systematically train people. Which I actually think is a really good idea, if you’re big enough to pull it off. Okay. All right. So let me sort of wrap this up now because there’s a lot there, but I think it’s useful to hear the list that, I mean, this really wasn’t easy. This is five, six years to transform from a traditional retailer to something more digital first. And that’s actually pretty common in terms of a timeframe. Most of these companies that do this, you’re talking about at least five years, and that’s assuming everything goes right. And that’s assuming there’s not a major change of strategy at the same time, which for retail, this was, this was a well-known path. You know, you start talking automotive or financial services, you have to do all of this. Plus you have to figure out what the strategy is, which is pretty hard. Okay. So how do I sort of assess all this? I’m going to put a slide in the show notes, which is my digital operating basics, my standard slide. And I’ve basically circled number two, three, five, and six. I mean, that’s what this looks like to me. If I was sort of advising this company, I would say, yes, okay, your baseline is you’re smarter, faster, better. That’s your key metric. But really, we’re doing three to four things. Number one, DOB2, digital operating basics. That is never-ending personalization and customer improvements. Okay, I mean we basically heard them say that, that we’re going to shift from, you know, building malls to being about the customer experience and convenience. We’re going to start to digitize the shopping malls. We’re going to go after continuous convenience. And that’s, I’m sorry, not continuous convenience, continuous improvements. And that’s pretty much what the CEO said. I’ll read you a quote. He says, what does success mean? If you stop to celebrate, someone else will move ahead of you, the world is moving faster, you need to improve continuously, you need to celebrate while you’re running. That’s pretty much the same thing, continuous improvement, DOB2, smarter, smarter, faster, better. People use different words for these things, but it’s really pretty much the same thing most of the time. Then we look at DOB3, which is digital core for management and operations. Okay, I mean that’s their data analytics stuff. That’s the developing of the KPIs. Fine. DOB, there’s a little bit of DOB four in there actually which is connectivity going to an ecosystem. They actually, I’m not gonna, the CEO talked a little bit about we’ve got to go from being a conglomerate to an ecosystem. Well, that’s about connectivity with other partners and things, but I don’t actually think that’s happening that much. Then we go to DOB five, which is leadership and management. Obviously, they worked on that early on. They did the Leadership Institute. They worked. That was kind of their first step. They hired in people. They brought, I mean, a lot of the leadership and management task happened when the new CEO took over. I mean, that was the biggest move in DOB 5 is we’re going to bring this person in as CEO who understands this stuff. And often that’s what it takes. Like you really have to wait for the CEO to step down and the next person to come in. Because even if they understand it, let’s say even if you did convince the CEO of this stuff and you did train them a bit, they just don’t have the confidence to make big moves. Because it’s too, you know, you need someone who’s got a bit more of a track record doing this. Okay, then we get to DOB6, culture, people and teams. And I think the best thing they did here was to build the academy and just do it systematically. If you’re a big enough company, that’s probably the best move. so that you’re training people all the time. Or you bring in some outsiders and you run training courses which is what I tend to pitch a lot. Anyways, I think all of that’s a really nice detailed story of the human capital side of sort of the digital operating basics. People is almost always the biggest problem in making this happen. You know, everyone likes to study Amazon because it’s fun. That’s such a tiny number of companies. The vast majority of the world’s companies are struggling and mostly failing to get talent that can do digital. I mean, if you’re a small medium manufacturer, you know, in the middle of Northern Brazil, how are you gonna go digital? How are you gonna build a smart factory? You’re in a small town, software people don’t like to live in small towns and they can live anywhere they want. One, you’re in Brazil. Brazil doesn’t have as much talent in terms of number of people trained as, say, China. One of the benefits of China is they have a huge number of digital people. So what do you do? Do you hire a vendor? That’s what a lot of companies do. They hire a vendor and they buy off-the-shelf stuff, which is good. They try and hire people part-time. They do try and hire some people full-time. That tends to be very difficult and very expensive. My go-to solution, my standard recommendation is start building this internally, build an academy if you’re big enough, which most companies aren’t, or I will pitch them a proposal, say I’ll come in every three to six months and I’ll train your team. I’ll turn your senior management into software people. And it doesn’t take years and years. It takes a year or so of doing that. That’s the only solution I know, and it’s not an awesome solution, this sort of piecing it together, but it’s literally everyone is struggling with this as far as I can tell. So that’s sort of the number one thing I liked that they did, that they did the Academy. And the thing I don’t like is, at least in the case study, I never heard what the winning business model looks like. Okay, we just talked about operating performance, the bottom of the six levels. What about the top three? You know, what’s the business model where if you pull this off, it is game over for your competitors? You know, that’s Mercado Libre, that’s Taobao, that’s Fresh Hippo, that’s YouTube. I mean, I like these businesses where, look, if you’re going to go first in digital and you’re going to struggle to make the transition, one, you’re going to be early, that’s good. Two, most companies, a lot of companies can’t do this. It’s too hard. So if you can actually fight your way through the digital transformation and put the winning business model in place, you can probably win. And that’s it. You’re just too hard to take on. That’s what I think is important to sort of draw that out early on. And that’s kind of what I do. And there’s a reason I’ve written five books about how to build moats in digital businesses. Anyways. So I think that’s enough for today. Not too long today, which is, I think, better. And yeah, the two ideas for today, two concepts, digital operating basics five, which is leadership and management, digital operating, basic six, people, culture teams. It’s a huge subject. Um, if you’re an analyst, it’s, um, it’s one of those things that’s hard to really tease out from a distance. You can often, you know it when you see it. It’s these companies that are in transition where it’s kind of hard to predict if they’re going to pull that particular piece off. Um, but yeah, it’s an important subject. Okay, that’s it. I’m on the road. I’m sort of on my way from Turkey down to Brazil. So having a pretty good time actually and getting a ton done. I’m working on book number five, which I don’t know if I really sort of stick on it. I think 14 days I can get it done and up on Amazon. Anyways, we’ll see. So that’s it for me. I hope everyone is doing well. Take care and I will talk to you next week. Bye-bye.
I write, speak and consult about how to win (and not lose) in digital strategy and transformation.
I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.
My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.
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