dcsimg How overcoming fear may change your business for good - Ramboll Group
     
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How overcoming fear may change your business for good

Game changer: When a paradigm shift like the digital one shows its brutal face, top management and marketing executives must get out of their comfort zones. But driving multi-channel sales is easier said than done admit two international experts who learned it the hard way. 
 

By Martin Christiansen

If you are using just a few devices at home, entering the electronic retailer Saturn’s flag ship store in Hamburg is much like going to a new planet. Overwhelmed by the total number of square meters and TV inches, it is hard to imagine that the company was once in orbit of global competition unable to reach the new digital world.

This was in fact the case though it may seem like light-years ago for fast-paced digital businesses. The mother company, MediaSaturn - also comprising retail chain MediaMarkt, had a record-high turnover of 17 billion Euros in 2007, of them nothing generated from online shoppers.

Wolfgang Lux, the then Managing Director in MediaSaturn responsible for IT, logistics, and innovation, recalls:

- At the time, we were blinded by our success and hamstrung by a very conservative culture. In a paradigm shift such as the digital one, you hardly ever see the market leader be the frontrunner but you have to face the fear of the unknown. Rather be diminished or risk the fear of cannibalising your own products than see competitors sweep you out of business altogether.

How overcoming fear may change your business for good

After a few unsuccessful digital moves, MediaSaturn acquired redcoon.com to speed up e-commerce and looking at the 2014 numbers, 1.4 billion Euros now stem from online sales with total sales surpassing 20 billion. In comparison, Danish toy star-trooper, Lego, reached a little less than 4 billion Euros in turnover last year.

However, the MediaSaturn’s margin bears witness to the fact that the digital transformation is quite the game changer – and a difficult one too. From 4.5% EBIT margin in 2007 to only 1.6 in 2014.

The awareness phase is over

According to Hubert Ramcke, a seasoned advisor and marketing expert of Ramboll Management Consulting’s Hamburg office, there seems to be a cognitive bias hindering professionals to really understand just how fast technology transforms business as every progress made doubles the preceding one in terms of speed. As a consequence, the technical solution is nearly here before you can even think it.

The awareness phase is over but for most companies the solutions phase it not here yet. The statement belongs to another German, Thorsten Stradt - a CMO who has helped his former company go from a catalogue pioneer to an award-winning multi-channel retailer with revenues well above 12 billion Euros. The name is OTTO.

Although OTTO remains OTTO if you spell it backwards, the company flipped its digital approach completely. Its first response to a staggering business model is worth a grin these days; instead of the bi-yearly catalogue OTTO initiated, well, a tri-yearly push of catalogues. Now, however, the laugh is no longer on OTTO. The company with some 54,000 employees has applied a rigorous innovation and change process with a digital first attitude. TV ad-spend is still heavily used to drive awareness and traffic but all media come together in a cross-channel marketing organisation with the customer journey as the guiding organisational logic.

A question of capabilities

To make sure OTTO can stay on top of its digital game, HR now zooms in on digital talents, and a digital portfolio venture has been set up alongside a next generation e-shop called About You which is based on open source development and hyper-personalisation. The result? A more effective media spend, a revitalised brand, and most importantly a boost in sales, especially coming from a new group of consumers that had previously been out of reach.

So what is the take-away for other businesses, one may ask?

- I don’t believe in blueprints for the perfect setup. But what I find important is to get out of the organisational comfort zones. A company must not overlook change management capabilities as a company asset. This goes from the top down. Bringing in a few digital natives will not solve your problem either. You have to constantly question the substance of any new initiative as it is often close to zero unless you apply it across the entire organisation. For instance, we had a new media department – for 15 years. I kept asking them for how long they were new, Thorsten Stradt recalls.

Challenge conventional wisdom and strike the right balance

For most professionals, the digital transformation may be scary and seductive at the same time. This does not mean that online is the safe bet per se. Although all experts featured in this article stress the willingness to experiment and tackle an old-fashioned mindset head on, they all urge executives is to integrate and strike the right balance between on- and offline. A balance still very much under the influence of our physical world.

In his recent book, Wharton professor and marketing expert David R. Bell challenges the conventional wisdom that the Internet makes the world flat and reduces friction by erasing the impact of the physical world on our buying habits. The professor argues that the way we use the Internet is still largely shaped by the physical world that we inhabit. Anyone can go online and buy a new TV - but the likelihood that we would do so depends to a significant degree on where we live. The presence of stores nearby, trendy and friendly neighbors, among other factors, play a critical role in our decision-making process when it comes to buying online.

This insight leaves us at the starting point: Saturn. The company has now aligned the different channels and applied successful concepts such as ‘click and collect’ or same day delivery of products bought online – products that can be returned in the local store in case of complaints. Also, apps for in store usages have been developed along with electronic price displays for a swift alignment with online prices.

Online. Offline. Bottom line is, however, that a great product in itself is the paramount marketing ingredient. Apple taught us so better than anyone. Or as Thorsten Stradt puts is:

- If you have a boring product it still won’t sell even if you put it online.

This article is based on an Executive Seminar held at Ramboll’s Head Office in Copenhagen with Wolfgang Lux, Hubert Ramcke, and Thorsten Stradt being on the speaker’s list.

Contact

Martin Christiansen
Martin Christiansen
Head of communication, Management Consulting
M(+45) 5161 2806
Emakc@ramboll.com