“2020 is not far from now. Businesses are taking decisions today that will affect their performance in 2020.” With these words, Tim Wolf opened the 16th Annual Conference of Strategic Management by Horváth & Partners in Stuttgart on May 11th, 2016. The conference showed impressive examples of how strategy work has changed companies in the way they think, align their business models, and succeed in the marketplace. The first-class speakers included Chef Strategy Officers and board members of Media-Saturn Holding GmbH, Bosch subsidiary BSH Hausgeräte GmbH, DEKRA SE, and AXA Konzern AG, as well as Prof. Dr. Thomas Hutzschenreuter of TU Munich and Ibrahim Evsan, a thought leader in social media and digital leadership. As an expert in digitizing strategic management processes, SOLYP Informatik GmbH supported the conference yet again as official event partner.
The predominant topic of the one-day event was the megatrend digitization which is affecting pretty much all industries and any kind of business activity. Oliver Greiner of Horváth & Partners called this "digital ubiquity" which poses many challenges that established companies could meet only by developing a holistic and consistent digitization strategy. Such a digitization strategy, he explained, should be derived from the corporate strategy and systematically developed in a multistage process: from the analysis of the digital market environment to the development of a digital mission statement, a digital business model, and digital strategic goals and metrics to the development, implementation, and monitoring of specific digital activities. As examples of digital business models, he mentioned platforms, data selling, digital services, sharing models, and eco-systems.
One company that has already successfully made the digital transition is the Media-Saturn Holding GmbH. In response to the decrease in in-store sales in the past few years, CFO Oliver Seidel explained, the company now pursues a multi-channel approach for its two brands Media Markt and Saturn enabling seamless integration of online and offline buying experience. Customers can find information online and buy offline, and vice versa. An important strategic measure to move this trend further is the planned introduction of digital price tags in retail stores which is expected to be completed by the end of the year. This will allow the company not only to respond more flexibly to price changes in the online environment, but to offer customers additional information about products via a smartphone app. With the acquisition of the successful online retailer redcoon, the Media-Satrun Holding is well positioned in the pure internet business as well.
A key success factor for digital transformation, Oliver Seidl said, is customer centricity. That is, businesses are no longer driven by their products, but by the needs and wants of their customers—along the entire value chain. While there was wide agreement among the conference speakers regarding the high importance of customer centricity, Oliver Greiner pointed out that the concept may be well known and accepted, yet many companies do not implement it consistently.
That is not the case though with Bosch subsidiary BHS Hausgeräte GmbH. With many illustrious examples, Andreas Kuhndörfer, Head of Corporate Strategy & Business Development, explained that customer centricity is an absolute must if a business wants to succeed in the home appliances market at the global level. As the consumer habits and needs are extremely diverse around the world when it comes to household tasks like cooking, baking, washing, drying, or cooling, “one-fit-all” solutions are deemed to fail. Rather, businesses need to develop products that are tailored to the specific needs of local markets. For strategy work, this means that the regional business units should be able to act relatively independently within the framework of the overall group strategy.
Another important success factor to stay competitive in the digital market environment in the long-term is focusing on the strengths of the company, as Thilo Schumacher, board member of AXA Konzern AG, showed impressively. First, however, he gave the audience a critical assessment of the current situation of the German insurance industry which is rather conservative and, according to Schumacher, suffering from two main strategic misjudgments. Firstly, insurers have responded to the lack of growth of the industry in recent years, mainly with cost reduction programs. “But that is no strategy,” Schumacher said. Secondly, they stick to the old way of thinking that everyone has to do everything by himself. A fact which is demonstrated by the industry’s record-breaking vertical range of production of 80-90%.
AXA has deliberately chosen a different path and is now relying on a new dual strategy, so to speak. In areas with clear differentiation and competitive advantages, the company is using and investing in its existing strengths to develop the competitive advantage further. In areas, however, that are not perceived by the customer as important differentiation factors, AXA relies on external strategic partnerships. This enables the company to exploit the strengths of others while saving its own resources. A good example of this is the ePortal "My Health," which AXA has developed jointly with CompuGroup Medical to enable paperless and efficient invoice processing in private health insurance. In the future, the company plans to make this tool available to other insurers using a fee-based sharing model. When it comes to developing innovative new products and services, AXA also collaborates with other established businesses, start-ups, and universities. But whether alone or togehter with others: the goal is always to develop simple solutions that deliver exactly the value the customer needs and not more than that.
Very inspiring was also the talk of Kerim Galal who has been responsible since 2013 for the development and implementation of a company-wide strategy process at DEKRA SE. To avoid silo thinking and gain a more realistic and comprehensive view, Galal has been pursuing a participatory approach focusing on "real involvement and commitment" and "trustful transparency." As part of a clearly defined top-down/bottom-up planning process, DEKRAS’s Top 50 managers and executives first develop and set the group’s overall strategic direction. Based on that, the 20 divisions and regions develop their individual strategies rather independently. For this purpose, a virtual strategy network has been established involving no less than 300 strategy process managers. Finally, the divisional and regional strategies are presented, discussed, and adopted at the annual strategy challenge week. The job of the central strategy department is to support the entire process and provide assistance to the many parties involved.
The fact that existing management approaches and methods need to change in order to make established businesses fit for the new digital world was mentioned throughout the event. In this respect, social media and digital leadership expert Ibrahim Evsan said, established firms can learn a lot from “digital native” companies, because many important management principles, such as diversity, agility, risk aversion, customer centricity, flat hierarchies, and a culture of errors and organizational learning have been part of their corporate DNA from the very beginning.
Prof. Dr. Thomas Hutzschenreuter from TU Munich also underlined the need for established companies to change due to technological progress. However, he qualified this fact by saying: “All companies need to change, but not all of them everything.” He argued that even healthy companies that are not yet struggling with expectation, performance, or liquidity problems need to critically analyze and question their position early on; however, without falling into the trap of blind actionism. And this, ultimately, is the job of the strategist.
The next Annual Conference of Strategic Management will take place again at Mövenpick Hotel Stuttgart on May 11th, 2017. We are already looking forward to seeing you there and welcoming you at our SOLYP booth!