Digital evolution Where next for the consumer facing business?

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1 Were next for te consumer facing business? Cover

2 2 Digital tecnologies are powerful enablers and lie beind a combination of disruptive forces. Teir rapid continuous development demands a response from consumer businesses tat wis to remain relevant to today s yper-connected consumer. Digital as te power to transform te way tat businesses operate Te callenge for consumer businesses is bot to develop capabilities tat integrate all teir cannels, tailor te offer to individual needs and circumstances, and leverage te benefits of digital tecnology, not just in te consumer cannel. New forms of digital competition, an ever increasing number of new product and service launces, and igly informed, more-demanding consumers, are some of te most significant callenges facing consumer businesses. However, eac callenge is also an opportunity to retink te role of tecnology, and to arness digital to evolve beyond te constraints of existing business practice. Nigel Wixcey, Industry Leader, Consumer Business, Deloitte

3 3 In order to exploit te digital opportunity businesses need to: 1Understand and continue to monitor te forces tat are driving cange 2Consider te digital opportunity from te consumer, te colleague and te enterprise perspective 3Develop a clear vision, strategy and fit-for-purpose operating model 4Be clear about te roadmap for cange but also be agile and prepare for future evolution describes te journey from a business were digital exists only in te consumer cannel to a business tat uses digital tecnology across te entire enterprise. In many consumer led organisations digital capability exists only in pockets. One response to tis as been to create centralised digital functions. However, to be truly transformational, digital needs to be all pervasive and not just anoter silo. Te goal must be digital excellence across te enterprise. Digital is te responsibility of every member of te leadersip team. It requires engagement, education underpinned by a clear strategic intent and driven by a sared understanding of te benefits and priorities across te business. Critically, digital transformation requires a roadmap not only wit a clear vision and strategy but also wit te agility and flexibility to allow for furter development. It is a process of evolution. Te process of digital evolution begins by developing an understanding of ow consumers are increasingly engaging wit digital tecnology and ow tese same tecnologies are disrupting existing business models.

4 4 Against te backdrop of an increasingly mobile centric world, were yper-connected consumers are living more and more of teir lives online, consumer businesses are adopting digital tecnology in an increasing number of ways. Tis is wat we call te digital acceleration. People Engagement wit digital tecnology for a range of tasks and applications is increasing. 70% SEARCH FOR INFORMATION 57% SEARCH FOR PRODUCT INFORMATION 50% BUY GOODS 42% BUY SERVICES 63% USE NAVIGATION OR MAPS 59% UPDATE SOCIAL NETWORKING SITES 1 in 4 UPDATE SOCIAL NETWORKING SITES DAILY 51% USE ONLINE BANKING 46% SEARCH/USE ONLINE VOUCHERS 34% 32% STREAM MUSIC PLAY ONLINE GAMES Tecnology Te sift from laptops and PCs to mobile devices will drive te need for connectivity and mobile access to more and more core business processes. 72% COMPARED TO 58% 10 MONTHS AGO OWN A SMARTPHONE 89% OF YEAR OLDS 60% 41% 23% OWN A LAPTOP OWN A DESKTOP Acceleration is set to continue Te average UK citizen now owns 11.4 types of media devices, up from 9.7 in 2011 Increasing ownersip of digital tecnology and Bring Your Own Device (BYOD) use in te workplace will continue to drive te acceleration. LOCAL NEWS OWN A TABLET 1% DO NOT OWN A DEVICE Applications Younger generations of digital natives are more engaged wit digital tecnology in a wider range of applications. generation Z vs all 59% REACH FOR ANYTHING 34% 63% DOWNLOADED 12 MONTHS 48% PREFER TO SHOP 1 in 2 1 in 3 WEBSITE 52% RESULTS PREFER SEARCH 40% LOCATION Source: Te Deloitte Consumer Review. Beyond te ype: te true potential of mobile and Deloitte Media Consumer survey 2013

5 5 Icons Mobile Social Analytics Cloud Cyber Digital is accelerating, wit new tecnologies coming tick and fast, some businesses are struggling to keep up wit te pace of cange. Te five forces of digital disruption provide a framework for understanding digital and ways in wic it is impacting consumer businesses today. Five forces of digital disruption Te five forces of digital disruption mobile, social, analytics, cloud and cyber continue to pose callenges and present opportunities to consumer businesses. Mobile Te most disruptive force of all. Mobile penetration and usage is growing exponentially, creating a new sales cannel and a platform for improving engagement and collaboration across te business. Mobile disruption data-points 6.8bn mobile subscriptions worldwide in bn mobile broadband subscriptions wit mobile broadband outnumbering fixed broadband connections by 6 to 1. Facebook as 819m active mobile montly users, 71% access every mont. 1 By 2014, 90% of organisations will support corporate applications on personal devices as businesses implement BYOD policies. Mobile

6 Icons 6 Mobile Social Analytics Cloud Cyber Social Social media is fundamentally canging te way in wic consumers communicate wit eac oter. It is also canging te way tey interact wit brands, bot in terms of increasing customer engagement and te data and feedback collected. Social media can also enable faster, easier and more Icons coesive cannels to communicate across a business and its supply cain. Social disruption data-points 65% of businesses use social tools to understand market sifts. 2 45% use social to improve visibility into operations. 2 45% leverage social tools to identify internal talent. Mobile 2 However, Gartner predicts tat 80% of social business projects undertaken between 2012 and 2015 will yield disappointing results because of a lack of leadersip support. 3 Analytics Managing, analysing and acting on te vast amount of data being collected is dramatically canging te way products and services are offered and sold. Analytics disruption data-points An MIT study sows tat companies using data-directed decision making enjoy a 5% 6% boost in productivity. 77% of businesses surveyed say tey use 50% or less of te data tey collect wilst 90% of business leaders contend tat information is a strategic asset. An analytics skills gap is emerging, Gartner predicts tat wile Big Data will create 4.4m jobs over te next two years, a tird of tese will remain unfilled. 4 Mobile Social Consumer Social Analytics

7 7 Mobile Social Analytics Cloud Cyber Icons Cloud Cloud services provide flexibility, scalability and total accessibility. Teir usage can increase tecnical capabilities wic consumer businesses must be ready to embrace. Cloud disruption data-points 27% of organisations already use or plan to use cloud options to augment teir Business Intelligence capabilities in te next 12 monts. By te end of te decade, cloud will account for about 65% of te enterprise market. Te cloud market is expected to Social grow from $40.7bn in 2011 to $241bn Analytics in Consumption of data storage is projected to grow at a 35% to 45% CAGR troug Mobile Cyber Te proliferation of digital access points and te exponential growt of consumer data ave increased te risks of cyber crime for consumer businesses wic is becoming an increasingly important issue for consumer trust, corporate governance and brand protection. Cloud Mobile Cyber disruption data-points 65% of UK citizens ave received pising s, 32% been victims of cybersquatting and 26% affected by malware. Over 50% of companies surveyed in 2013 ad knowingly experienced an attack in te last 12 monts. Cyber criminals successfully attack a large company about 1.8 times a week, a 42% increase from Macafee puts te potential impact of global cyber-crime at $300bn to 1tr. 6 Social Analytics Cloud Cyber Consumer Colleague Enterprise

8 8 By developing an understanding of te five forces of digital disruption, callenges can become opportunities; opportunities to develop new revenue streams, to improve operational efficiency and drive employee engagement. Tis is ow te process of digital evolution begins: te journey from a business were digital resources and capabilities are focused in te consumer cannel, to one tat uses tem to deliver business value. Consumer Environment Enterprise Te quick acceptance and use of new digital tecnologies by consumers is driving te digital acceleration. Consumers are living more of teir lives online and on te move. Consumers now expect to be able to access information about products and services from anywere and to be able to enjoy te same levels of service and experience from every available touc point and media device tey own. Gone are te days were companies need to only watc teir traditional and known competitors. Wit a constant stream of digital introductions, new treats can emerge from anywere, digital disruption is resaping te competitive landscape. New competitors suc as dollarsaveclub.com, Airbnb and EatWit are callenging establised players by using digital tecnology to create innovative and more agile product and service models. Consumer businesses need to respond troug innovation to stay aead of any potential competitors and troug embracing digital tecnology just as teir consumers ave done. Many organisations digital strategy is most mature in te consumer and marketing functions, te rest of te business often lags beind. Tere may be pockets of excellence and capability, but tese are often developed in isolation, witout a clear vision. Consumer businesses need to consider new ways of working and different operating models and look at ow tey can eliminate current inefficiencies wit more agile digital solutions. Digital tecnology as increasing and substantial benefits to all areas of te business by driving efficiency and engagement.

9 9 In order to better understand te potential impact of digital tecnology for consumer businesses, we examine it from tree different perspectives: How to respond to, serve, retain and excite consumers How to enable, support and develop colleagues How to structure te business

10 10 How to respond to, serve, retain and excite customers wo are: Connected & empowered Rapidly raising teir expectations Demanding greater coice More informed Socially engaged Environmentally aware Time poor Callenges Mobile is now te first point of contact for 50% of consumers. Consumers continue to embrace digital media, 72% now own a smartpone as te adoption of tecnology grows at an exponential rate. 7 Digitally influenced soppers are not only more engaged but also tey spend more tan store only soppers. In te next decade Deloitte predicts tat up to 50% of UK store based retail sales will be digitally influenced. Tis influence manifests itself in oter ways as consumers turn to teir peers for advice and recommendations, and sare teir own experience of brands. Response Products and services need to be made available to consumers troug te cannels tey want to use. Consumer businesses must engage wit teir yper-connected consumer in two-way conversations tat can lead to deeper and more profitable relationsips for bot parties. Social engagement can also generate deeper and more realtime consumer insigt bot in terms of beavioural data and feedback wic can be used to drive innovation and product development. Engagement troug social media can also enable consumer businesses to target promotions and marketing communications to te individual tat are context relevant and location specific, terefore increasing conversion rates.

11 11 How to enable, support and develop colleagues wo are: Constantly connected Expected to do more wit less Keen to collaborate Driven by incentives Demanding fairer measures Empowered to provide a personalised service Callenges Colleagues need to be constantly connected, to better understand and meet te needs of te increasingly demanding consumers tat buy teir products and services. Wit leaner operations employees are expected to acieve more wit less time and fewer resources. Tey are also given additional responsibilities to give personalised consumer experiences. Colleagues want to collaborate but require fit-for-purpose tools and te necessary training opportunities. Response Te desire to be constantly connected needs to be satisfied troug internal digital platforms providing quick and easy communication bot wit peers and along reporting lines. Businesses are starting to understand tat people want to live digital lives inside te workplace as well as personally. Enabling tis digital workplace will create a motivated and committed workforce and elp retain talent. Below are four key suggested approaces to framing te digital agenda wit colleagues: 1 Recruit to retire 2 A day in te life 3 Montly and annual cycles 4 Innovation and collaboration

12 12 How to structure teir business to: Seize opportunities for growt Exploit digital platforms Build new capabilities Redesign te operating model Deliver more effective and more efficient business practices Callenges Te structure of many organisations, te lack of te correct incentives or te absence of a culture conducive to propagating a creative and agile environment can all old back te development of digital capability. Leadersip also plays a key role in driving engagement wit new digital tools, solutions and processes. Inflexible IT systems, processes and oter tools can also prove to be significant barriers. New capabilities need to be developed to arness te power of digital tecnology, ranging from social listening and user experience to digital enterprise resource planning. Response Consumer businesses need to develop a coerent digital strategy across te entire organisation to drive growt and increase efficiency and engagement but witout creating a new function were all te digital expertise exists. Digital platforms need to be leveraged as part of a digital strategy to maximise teir potential and to drive collaboration. Data analytics is at te eart of tis process, wit digital tools increasing ability to capture, analyse and visualise, not only consumer or customer data, but supplier and operational data. Tere is also an opportunity to utilise non-traditional data sets to bring fres perspective and insigt suc as location data, social media, and mobile pone usage data.

13 13 Digital is te responsibility of every member of te leadersip team. It requires engagement, education and to be driven by a sared understanding of te benefits and priorities for eac role. Te responsibility lies wit every member: Cief Executive Officer Product & Services Development Cief Financial Officer Strategy & vision Capability & expertise Competitive treats & opportunity Organisational agility Profitability & sareolder value Cief Marketing Officer Digital brand strategy Digital asset management Customer analytics & segmentation Personalised marketing Social insigt and response Innovation & collaboration product lifecycle management Product & service lifecycle management Cross cannel mercandising Online only ranging Social line review and development 3D printing Cief Operations Officer Using digital tools to drive operational efficiency Control and compliance Workflow & distribution Cross cannel customer service Employee enablement & productivity Maximising return on investment New tools for measuring and management Aligning incentive & reward wit financial goals R&D investment benefits Human Resources Director Organisational design & reconfiguration Staff performance incentives Enterprise social collaboration Skills based digital organisational structure Staff training, awareness & up-skilling Capability development Attraction & retention Commercial Director Exploiting new levers for sales growt and oter financial metrics Driving value from digital investments New business enablement New cannels to market New products and services Competitive response Supply Cain Director Real time inventory visibility Direct to consumer fulfilment Witin day & our fulfilment Efficient returns & reverse logistics Scientific forecasting Cief Information Officer Digital vision & strategy Clarity on te target arcitecture Delivering te roadmap Responsive IT organisation Security & service availability Innovation Digital risk & compliance

14 14 An increasing number of digital assets and access points, combined wit increasing social engagement wit customers and consumers, and major canges to legislation, makes a compelling case for digital governance. Digital activity is increasing bot in terms of volume and complexity. Wit tis increase comes increased risk and te need for compliance. More digital activity Tere as been considerable growt in digital as a marketing cannel, wit 52% of product recommendations now on Facebook. More digital assets Te type of media is canging, currently te majority of digital assets are accessed via websites but increasingly social media, collaborative tools and processes and Apps are also becoming important cannels, and terefore valuable digital assets. Treat to brand image In te digital world brands are exposed to new risks due to always on media and social engagement wit consumers and, wit tis risk, comes te potential to lose ard won customer trust and loyalty in an instant. Compliance Compliance processes need to extend to cover all digital assets and interactions, wit digital risk moving up te agenda of te governance board and audit committee. Business continuity As a large volume of transactions and processes move online, businesses increasingly depend on connectivity 24/7 bot for te employees and for teir consumer. A digital governance framework Design Build Run Governance structure Policies, standards and processes Compliance monitoring programme Customised web analytics Inventory management solutions Digital asset management processes Monitoring compliance and performance Te callenge is ow do consumer businesses ensure tat policies and standards keep abreast of dynamic digital environment and regulatory requirements?

15 15 is a fluid and on-going process. Consumer businesses need to accelerate digital tinking to drive digital evolution. Key decisions Pre-digital Digital one Digital two Consumer type Naive Homogenous Informed Segmented Constantly connected Personalised Process Optimised to reduce waste Mostly manual Process automation Insigt driven decision making Tecnology is key (ERP, CRM) and connecting wit individual customers Organisation Aligned by process Employee trained on processes Organisational model furter Cross silo collaboration among employees optimised IT playing key role Management style Top down and linear Reporting of People Collaborative and employee centric Cannel Single cannel Multicannel Omnicannel Market condition Steady demand, supply controlled Demand driven Customer controlled

16 16 Te digital journey must be informed by a vision and strategy, owever, given te rapidly evolving digital landscape it needs to be recognised tat tis will be fluid and will continue to evolve. Vision Strategy Operating model Business value drivers Competitor/ Market Insigt Innovation Process 1. Consumer engagement 2. Colleague enablement Vision Digital Strategy Consumer Journeys Capabilities People Roadmap 3. Revenue growt 4. Operational efficiency 5. Risk & governance Customer Insigt Operating Model Systems

17 17 If you would like more information regarding ow Deloitte can elp you develop your digital approac, please contact our specialist team. Howard da Silva Deloitte AG Consumer Business Industry Leader J.N. Hill Deloitte Consulting SA Partner, Consumer Business Antony Wals Deloitte SA Director, Consumer Business Josep Press Deloitte Consulting AG Senior Manager, Consumer Business

18 19 Back cover 1. Facebook users and advertising revenue ttp://adage.com/article/digital/facebook-41-ad-revenue-mobile-q2/243293/ 2. Deloitte University Press & MIT Sloan Management Review 2013 Social Business Study: Sifting Out of First Gear. 3. Gartner predicts 2013 Social and Collaboration Go Deeper and Wider, Nov 28, Forrester Researc, April 2011, sizing te cloud by Stefan Ried, PD, Holger Kisket, PD. 5. Gartner 6. Te Economic impact of Cyber Crime and Cyber Espionage, ttp:// 7. University of Massacusetts report on social media: ttp:// Deloitte refers to one or more of Deloitte Touce Tomatsu Limited ( DTTL ), a UK private company limited by guarantee, and its network of member firms, eac of wic is a legally separate and independent entity. Please see for a detailed description of te legal structure of DTTL and its member firms. Deloitte LLP is te United Kingdom member firm of DTTL. Tis publication as been written in general terms and terefore cannot be relied on to cover specific situations; application of te principles set out will depend upon te particular circumstances involved and we recommend tat you obtain professional advice before acting or refraining from acting on any of te contents of tis publication. Deloitte LLP would be pleased to advise readers on ow to apply te principles set out in tis publication to teir specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in tis publication Deloitte LLP. All rigts reserved. Deloitte LLP is a limited liability partnersip registered in England and Wales wit registered number OC and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Tel: +44 (0) Fax: +44 (0) Designed and produced by Te Creative Studio at Deloitte, London A

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