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DIGITAL NEW CUSTOMER EXPERIENCES, NEW MODELS, NEW TRANSFORMATIONS CONTENTS INTRODUCTION 5 SUMMARY

THE LONG DIGITAL MIGRATION 8 The US has made huge advances in digitalization, leaving Europe and the rest of the world way behind. Missing the boat this time around has already had far-reaching consequences. And the implications will be even more serious if these countries fail to anticipate what’s coming next. Indeed, digitalization is no NEW CUSTOMER EXPERIENCES, NEW DIGITAL BEHAVIORS 16 ordinary transformation: it’s a long and deep game-changing migration for most – much like First disruption electricity in its time. Understanding and anticipating these changes is complex, but nonetheless vital. New demand created by ultra-personalized products, services, and suggestions proposed in real time throughout the digital and physical journey 17 THE LONG DIGITAL MIGRATION All of these changes will enrich the digital scope of customer experience and continue Second disruption In less than a decade, digitalization has gone global, Unprecedented demands and greater price sensitivity 18 intergenerational, mobile, and collaborative. Our to modify buying and consumption behaviors around six major disruptions: Third disruption lives are becoming continuously connected through From continuous connectivity to gaining control over available time 18 objects (or devices) that connect themselves to the • New demand created by ultra-personalized Fourth disruption and are overflowing with an abundance of offerings and suggestions in real time. Reinventing the shopping journey and the customer experience 20 information. With no slowdown of these trends in • Unprecedented demand for quality and greater price sensitivity with greater access to Fifth disruption sight, the world is expected to undergo even more information and prescriptive influence. Simplification that accelerates adoption cycles: “all early adopters” 21 dramatic change by 2025: • Six times more available connected Sixth disruption • The growing penetration of time thanks to augmented reality and The or the revenge of the real economy 24 will drive widespread, global usage of the internet and social networks by over 80% of connected devices. the population. • Reinvented purchasing journeys as well as NEW COMPETITIVE DYNAMICS, NEW BUSINESS MODELS 28 • With the installation of smart systems in virtual and physical customer experiences that homes and cars, and other devices (such redefine the role of physical stores. First pattern as wristwatches and glasses), connected • Increasingly accelerated adoption cycles. Innovate through latent demand 28 objects will invade our available time, • The revenge of physical industries, which, Second pattern whether we are travelling, in the street, through connected devices, will have access From transactional to interactional, the battle for the customer relationship 29 or sleeping. to a vast range of digital technical and Third pattern • The constant progression of e-commerce commercial opportunities. Accelerated growth models 33 will reach an initial phase of maturity (15 to 25 percent penetration rate) in many industries, Fourth pattern with newcomers challenging many established Industry 4.0 and digital production 35 UNDERSTAND THE NEW legacies and profit models. ECONOMIC MODELS Digitalization is profoundly changing the rules OF COMPANIES 37 ANTICIPATE NEW EXPERIENCES of competitive dynamics: global platforms First question AND DIGITAL BEHAVIORS give digital players a major cost and competitive What digital transformation model should we use to manage very The internet reshapes our everyday experience edge and enable them to project their model different company cultures and paces? 37 a little bit more each day. New usages are without concern for industry or geographical Second question rapidly adopted. borders. Although each industry has its specific How can we integrate entrepreneurial ? 38 characteristics, a few key models are emerging. Third question Although young people remain the pioneers, How can we transform large corporations? 39 older generations are only about six years New “technologically transparent” offerings are behind in adopting these new practices. focused on latent demand. The winners are no Tomorrow, technological developments and longer the technological pioneers, but those who CONCLUSION 43 these new usages will create new opportunities. understand and solve existing or latent customer problems better than others and who manage to • Choose the model (integrated or isolated) create an emotional bond with them. to enable digital transformation to manage INTRODUCTION sometimes very different company cultures Interactional models or the battle for the and paces. customer relationship. From purchasing products • Rethink innovation completely by using or services by the unit in a predefined format, incubators, recruiting critical new competencies Most countries are lagging way behind a ratio of two to one per capita since 2006. we are gradually moving to subscription-based (data analysts, for example), and establishing the US in the new digital world. The level The results speak for themselves: 80 percent new development and marketing practices models enabling continuous access to a broad of digitalization in Europe is, for example, of the leading websites originate in the US, (such as test and learn, and agile development). range of scalable content. significantly lower than in North America. while 81 percent of users are located outside • Accelerate the growth of digital culture While Europe was ahead of the curve with the US (see Exhibit 1). Of the 25 largest digital Offerings hitherto similar for all customers can throughout the organization: digital be ultra-personalized with invisible pricing upsets the formal dimensions that the of GSM and the deployment of companies in the world, 85 percent of the differentiated by customer segment. The battle are typical of large business organizations DSL 20 years ago, North America has caught value is American, 13 percent Asian, and only 1 joined by physical industries and their digital (internal processes, HR models, governance, up with Europe. It has been investing much 2 percent European . more in its digital infrastructures annually, by intermediaries will be centered on control of the and so on). The organization is the principle obstacle to the dissemination of digital. People customer relationship. Today, each player holds must not simply tolerate the new digital world, information that the other does not and will but truly embrace its various dimensions with Exhibit 1: Number of single monthly visits capitalize on this to capture, develop, and retain suitable drivers (work environment, learning MILLIONS high-value customers more effectively. expeditions, managerial exemplarity, etc.).

Accelerated growth models. With 2.9 billion internet users, digital models naturally enjoy a TURBULENCE CAUSED BY THE Google powerful advantage of scale, especially since MASSIVE SPREAD OF DIGITAL Microsoft distribution costs largely favor the leaders in each We are now entering an era of massive digital market (three times higher conversion rates). Facebook dissemination. Much like industrial a The establishment of global platforms across decade ago (where the first years of euphoria gave Yahoo! the entire value chain (sales, customer relations, way to years of turbulence after 2006), the scale media) will increasingly foster the effects will be increasingly great, and traditional Wikipedia deployment of new accelerated franchise-type business models increasingly challenged. The .com growth models. first impacts are already becoming apparent: Industry 4.0 and digital production. In the next accelerated product and service imports through Apple decade, the digitalization of industrial processes digital channels, tax evasion in a difficult-to-regulate and the emergence of “smart ,” with world without physical barriers, sudden shift of Glam Media some industries adversely affecting traditional corresponding productivity gains of around 30 Tencent percent, will be made possible by the development players (distribution, travel, lottery, VOD, etc.). of cyber-physical systems (CPS), where automated Every company must urgently integrate these new Baidu.com International users elements collaborate to command and control challenges now, position themselves on these new physical entities. business models and build global champions able to hold their own a completely open and still largely 0 400 800 1,200 US users under-regulated global supermarket. Source comScore Global, Kleiner Perkins Caufield & Byers (KPCB) DEPLOY NEW TRANSFORMATION MODELS Digital transformation is not the product of a three- year company vision, but a gradual migration over a decade. The required key drivers to put into place are very different: 1 Market value data, 2013. Source: FactSet, Google Finance, Morgan Stanley Research.

5 Missing this first boat is a major concern The volume of data exchanged on the for these countries, considering the internet has been growing exponentially KEY FIGURES that are yet to come. It is since 2007. This affects every segment of estimated that some 50 points of GDP the market, both B2C and B2B, across all are transferred every year from Europe or part of the value chain. For example, THE DIGITAL NEW CUSTOMER NEW BUSINESS MIGRATION EXPERIENCES MODELS to the US, with some 500,000 jobs that the digital economy currently represents are not created2. Various studies indicate $185 BN in France, or 6.8 percent of service that, by 2020, from four to six million jobs in sales (excluding financial services). By 2020, Europe will depend on investments in digital it is expected to represent 14 percent of 6x 3 40-80% infrastructures and regulation favorable to service revenues . 80% more available time will be spent connected, due of the digital market these investments. of the leading internet to augmented reality is captured firms are US based Until now, the big winners in the digital and the Internet by market leaders Of course, a few American firms also missed world have been “internet natives”. This of Things the boat (such as Kodak, Blockbuster, and may seem troubling, but it is impossible Blackberry) but new “internet native” to find a single company that has turned models nonetheless continue to be invented the digital corner without a hitch. With in the US. New trends are emerging, which the exception of Netflix, which managed will continue to reshuffle the deck on to move from DVD rental to become the 14% >80% 3.5x markets in the years to come, such as: the streaming champion, for the moment, every of service revenues higher conversion of the population will be generated rate for leaders Internet of Things (or IoT, where internet- internet winner is an internet native. The will be connected by digital channels compared by 2025 enabled devices connect with other objects), formula for such successes is more complex by 2020 to challengers the virtualization of than it seems, as it involves the ability to, for networks, the emergence of global business- example, attract talent, establish an agile to-business (B2B) platforms (following organization to accelerate time-to-market, business-to-consumer (B2C) platforms), big and form partnerships. data and its various applications, and the collaborative economy. Digitalization is no ordinary transformation; 50% 80 BN 30% it’s a profound migration, which, like of services objects productivity gains Digitalization is penetrating all sectors electricity in its time, is changing the rules will be exported will be connected expected from and will represent a major share of of the game for every sector of activity. by 2020 by 2025 smart factories tomorrow’s growth and competitiveness.

17% 230 MM

growth new internet users for e-commerce each year (3.5 times the from 2011 to 2016 population of France)

“We always overestimate the change that will occur in the next two years and underestimate the change 2 General commission for strategy and prospective thinking 2013, Organisation for Economic Co-operation and Development (OECD), 2012. that will occur in the next ten. Don’t let yourself be 3 “Globalization of services: a game changing decade,” Oliver Wyman. Estimates based on data from the National Institute of Statistics and Economic Studies (INSEE). lulled into inaction.” BILL GATES

6 • Introduction 7 THE LONG DIGITAL MIGRATION Exhibit 3: The digitalization of Global Intergenerational E COMMERCE REVENUES MONTHLY SPEND ON AMERICAN E RETAIL $US BN 2013, $US 800 100 Asia-Pacifique The digitalization of our society in less than •• Intergenerational: All generations are CAGR +23% affected. Even if new generations are the -25% a decade, and in successive phases (see 600 75 Exhibit 2), has gone global, intergenerational, forerunners, older generations are falling North America rapidly into line. In the US, seniors (aged CAGR +11% mobile, collaborative, continuously over 55) are largely catching up and Europe connected, and connected to objects. Last 400 CAGR +9% 50 are buying only 25 percent less on the China but not least, society is swamped with an internet than their younger counterparts. CAGR +38% overabundance of information. A few statistics 200 25 •• Mobile: In 2013, more connections clearly illustrate this (also see Exhibit 3): were made from mobile devices than from traditional . We are France •• Global: 35 percent of the world’s 0 CAGR +8% 0 population is using the internet in 20144 currently seeing the rapid transfer of all 2013 2014e 2015e 2016e 18-34 years 35-54 years 55+ years with annual growth of 17 percent in digital usages (information, purchasing, China and 32 percent in India. In this and social networks) toward mobile, Mobile Collaborative new context, Asia will dominate digital particularly in Asia. In 2018, this continent GLOBAL MOBILE DATA TRAFFIC NUMBER OF SOCIAL NETWORK USERS will represent 44 percent of mobile traffic, TB PER MONTH BN commerce with nearly $800 BN in sales 20 2 forecasted for 2016, or 28 percent of which is a tenfold increase from 2013. And global e-commerce, far ahead of North rather than “e-commerce”, we can think of it instead as “m-commerce”. 15 Other Facebook America (19 percent) and Europe (17 CAGR +88% percent). China alone represents a •• Collaborative: One of the most notable market equivalent to all of Europe. phenomena in the past five years has x10 10 North America 1 CAGR +56%

Exhibit 2: Phases of the Europe 5 CAGR +52% Phase 1 Phase 2 Phase 3 Phase 4 Phase 6 Twitter SEARCH TRANSACTIONAL INTERACTIONAL COLLABORATIVE INTERNET OF THINGS Asia-Pacifique (Social networks, (“Sharing economy”) 0 CAGR +56% 0 “Apps economy”) 2013 2014 2016 2018 2006 2010 2014e 2018e

Continuously connected Connected to devices Phase 5 EMERGING PLAYERS TRANSITION TO INTELLIGENT OBJECTS WORLDWIDE CONNECTED PEOPLE AND OBJECTS WORLDWIDE CATCH UP 2014 EQUIPMENT UNITS BN BN 15 50 Connected Digital Tablets devices Massive spread CAGR +12% M-economy of digital 12 40 2000 2004 2008 2011 2014 2017F 9 CAGR +40% 30

Google Amazon Trip Advisor Airbnb Alibaba M2M Yahoo Booking Facebook Blablacar CAGR +42% Homeaway 6 20 Non smartphones AVERAGE TIME CONNECTED IN THE US 3 CAGR -6% 10 Connected people Total time Online (h) 2.6 3.8 5.8 6.5 Smartphones 0 0 Time Mobile device (% of time online) 12% 21% 49% 55% CAGR +18% 2013 2014 2016 2018 1995 2003 2010 2013 2015 2020 Source Oliver Wyman analysis, E-marketer, Adage advertising, The Digital future project CAGR Compound Annual Growth Rate Source Cisco VNI Mobile, 2014; Ystat, March 2013; Gartner, eMarketer, May 2014; Cisco VNI, 2014; Planet Retail financial data; Oliver Wyman analysis 4 Wearesocial, 2014.

8 • The long digital migration 9 undoubtedly been the use of social Digitalization is spreading at an Exhibit 4: Digital usage in five countries networks. Twenty-six percent of the unbelievable speed on a global scale. global population already belongs to one In just ten years, the world will have INTERNET USAGE or more social networks. Messaging on changed profoundly, given the incredible social networks has surpassed emails in India China US Fra. Ger. UK evolutions in some countries. 12% 42% 80% 83% 84% 87% volume and time spent for three years Internet penetration (% pop., 2014) now. Collaborative business models also show how asset-based usage and value Here are some examples (see Exhibit 4): Ger. Fra. UK China India US is gaining ground on the ownership of •• Internet penetration has already hit Internet usage 3,8 4,1 4,2 4,5 4,9 5,2 on computers connected devices. a plateau in most OECD countries (h/day, 2014) •• Continuously connected: Smart (between 80 and 90 percent), but devices (such as smartphones and digital emerging countries are catching up with Fra. Ger. US India China UK 3% 4% 5% 6% 7% 12% tablets) are on the verge of dominating annual growth rates of 10 to 30 percent. E-commerce (% PIB - est. 2016) the market, expected to rise from fewer •• E-commerce is growing very dynamically than 30 percent of all mobile devices (17 percent a year on average5), and will China India Fra. US Ger. UK today to over 60 percent in 2018 with 3% 5% 7% 7% 12% 23% represent 12 percent of GDP in the UK in E-retail over 50 percent of the global population 2016 and 23 percent of retail sales. (% retail est. 2016) remaining continuously connected. •• In India, more time is already spent •• Connected to objects: Connected India Ger. Fra. China UK US on the internet on mobile devices (2.6 7% 35% 42% 46% 56% 57% objects will represent 20 percent of Social networks hours a day) than in most more mature (% pop. - 2014) smart devices by 2018. Even more countries. The share of the time devoted surprising, over 50 billion objects are Fra. to social networks is also 60 percent Ger. China UK US India expected to be connected by 2020, or 1,4 1,5 1,9 2,3 2,4 higher in India than in Germany or Social networking time nearly 10 times the global population. (h/day, 2014) France, with an average of 2.4 hours a Smartphones are on the verge of day (all devices, including mobile). becoming the universal remote device used by consumers to control many •• Emerging countries already make everyday objects (such as TVs, cars, purchases on mobile devices more often USAGE thermostats, and washing ). than in Europe and the US (69 percent However, the opportunity to connect of users in China versus 26 percent India Ger. Fra. China US UK 13% 40% 42% 47% 56% 62% other devices to the internet also creates in France). Smartphone penetration (% pop., 2014) a vast scope of technical and commercial opportunities for industries. Equipped Based on the existing dynamics, we can UK Fra. Ger. China US India with a chip or a captor, every object predict a few essential features of the Internet usage 1,0 1,5 1,9 2,4 2,6 can now produce data or support new by mobile users world in 2025, which should be seriously (h/day, 2014) services and new industrial processes. considered today (see Exhibit 5): Fra. •• Overabundant information: Generated UK Ger. US India China •• Generalized usage of the internet Services geolocalized 87% 88% 94% 95% 96% and shared information is growing by smartphone exponentially (8 zettabytes in 2015 and social networks on a global level (% pop., 2014) compared to 1.8 in 2013) thanks to the (over 80 percent), accelerated by the domination of smartphones (or their UK Fra. Ger. US India China cloud. This represents an annual growth 73% 74% 76% 77% 91% 98% next-generation equivalents). Searches with smartphones of over 20 percent, with no slowdown (% pop., 2014) in sight. Google invests $4 BN a year in •• The revolution of connected objects, data centers (25 percent more sites in which will be an integral part of our Fra. Ger. UK US India China 26% 32% 39% 46% 54% 69% 2013). This abundance of information everyday lives (home , Purchases with smartphones creates great opportunities to innovate wristwatches, glasses, cars, and so on) (% pop., 2014) in terms of understanding B2C and B2B invading all our available time, even while Emerging countries ahead on digital behaviors customer behavior. we are traveling, in the street, or sleeping.

Source Global digital statistics report, 2014, wearesocial; Economist Intelligence Unit, BCG report; The Internet Economy in the G-20, Global Digital Statistics report 5 E-Commerce Companies – world, Xerfi, 2013.

10 • The long digital migration 11 Exhibit 5: Internet penetration in the travel industry

PERCENTAGE the travel industry 75

US UK

50

Disruption point The travel and entertainment industry has transformed since 2005, Germany Reinvention of the industry France when internet travel sales reached 15 to 20 percent, due to the 25 emergence of online players which captured over 20 percent of the total market value in less than six years, in successive phases.

Phase 1 0 • Rising power of digital brands in 2005 and 2006 (such as 2001 2005 2009 2013 2017

Booking.com, Expedia.com, and Promovacances in France), and Source Oliver Wyman Point of View: Digital Disruption in the Travel Industry, Euromonitor gradual shift of the balance of power toward these new players. • Lower sales and pressure on margins, and massive restructuring Exhibit 6: Travel industry trends of traditional travel agencies (40 percent decline in the US in TOTAL VALUE CREATED under three years). PERCENTAGE • Shift toward new hybrid online-offline business models. 100 Online Phase 2 75 • Development of metaplayers (such as Google Hotel Finder and Tour Operators TripAdvisor) starting in 2008. Cruises 50 Phase 3 Others Disruption point • Explosion of the collaborative economy starting in 2011 (Airbnb Reinvention of the industry Low-cost airlines and HomeAway, for example). Repositioning of physical players 25 on customer relationship capture models (digital itinerary, Traditional airlines CRM, retention). 0 Hotels & Resorts Tomorrow 1980 1990 2000 2010 $3 BN $25 BN $160 BN $300 BN • Development of Asian distribution platforms and augmented reality, and continued upheaval of the purchasing itinerary. Source Oliver Wyman Point of View: Digital Disruption in the Travel Industry, Euromonitor Exhibit 7: The digital world in 2025 Exhibit 8: E-commerce penetration as a percentage of sales

2014 2025 US WESTERN EUROPE*

2013 2018 2013 2018

Internet penetration 35 >80 Music Music Percentage of global population Travel Travel

Social network users Books Books Percentage of 26 >70 global population Consumer Consumer electronic electronic

Home furnishings Home furnishings Smartphone subscriptions Percentage of 31 >80 global population Media toys Media toys and games and games

Total retail Total retail Disruption point Disruption point Connected objects 15 80 BN Beauty and Reinvention of the industry Beauty and Reinvention of the industry healthcare healthcare

Food and drink Food and drink

E-commerce G20 5 >10 Percentage of GDP 0% 25% 50% 75% 100% 0% 25% 50% 75% 100%

* Countries considered on the analysis: UK, Germany, France, Spain, Italy, and Sweden Source Global digital statistics report, 2014, wearesocial; Economist Intelligence Unit, BCG report; The Internet Economy in the G-20, Global Digital Statistics report

•• And especially the decisive advance Akin to the globalization of industry of e-commerce, which, by reaching after 2006 (when the effects of industrial a certain level of maturity in many delocalization became visible), the first SUMMARY industries, will challenge most historical years of euphoria will give way to years of profit models. The gradual penetration turbulence in business models. Although of digitalization in each sector (in all or Our digitalized society, in less than ten years, has become The constant progress of e-commerce will have we are just entering this period, the first part of the value chain) can be observed global, intergenerational, mobile, collaborative, reached a first stage of maturity (15 to 25 percent effects are already visible: acceleration of to reshuffle the deck beyond a certain continuously connected, soon to be connected to penetration rate). product and service imports through digital maturity threshold, generally between 15 objects and, finally, overflowing with information. and 20 percent, when the mass market channels, fiscal evasion in a hard-to-regulate And, most notably, the decisive advance of is reached. Most markets have not yet world without physical barriers, and sudden The upheavals connected with this new dynamic are far E-commerce, by reaching a certain level of maturity hit this stage of disruption but many will upheaval in some industries adversely from over. In another decade, the world will be even more in many industries, will challenge most historical within the next decade (see Exhibit 8). affecting local players (the travel and hotel profoundly transformed. profit models. The gradual penetration of digital industry, lottery, retail, and VOD for example). technology in each sector (in all or part of the value The growing penetration of smartphones will drive chain) can be observed to reshuffle the deck beyond a widespread usage of the internet and social networks certain maturity threshold, generally between 15 and worldwide by over 80 percent of the population. 20 percent, when the mass market is reached. Most Linked to homes, cars, and other devices (wristwatches, markets have not yet hit this stage of disruption, but glasses, and so on), connected objects will invade all of many will do so within the next decade (see Exhibit 8). our available time.

14 • The long digital migration 15 Contrary to popular belief, this Exhibit 10: Internet usage by age group NEW CUSTOMER EXPERIENCES, phenomenon concerns not only the PERCENTAGE OF THE POPULATION NEW DIGITAL BEHAVIORS internet-native generation. These EU 27 COUNTRIES transformations are affecting every age 100 group, but at different adoption rates. 16-24 years CAGR 4% Although younger people remain the 80 25-54 years The internet is completely transforming the internet, the recent slide toward mobile pioneers, older generations are just six CAGR 7% day-to-day existence, little by little, each connectivity makes smooth, continuous years behind in adopting the new usages. 60 day. It offers access to many new products access possible. 55-64 years On the one hand, with 17 percent growth, CAGR 11% and services at ever-lower prices – even for 40 e-commerce for seniors is becoming an free – accounting for incredible adoption Inevitably, these new experiences will attractive segment; on the other, 71 percent 65-74 years CAGR 17% rates (see Exhibit 9). profoundly change our behavior in terms of 20 how we shop, interact with others on social of children under 12 are already using With 70 percent of OECD households networks, consume content and culture, or digital tablets, and represent a significant new market (see Exhibits 10 and 11). 0 having ever-faster and cheaper access to even look for work. 2005 2007 2009 2011

Tomorrow, new opportunities will be Source Euromonitor, OECD statlink Exhibit 9: Usage trends created as a result of recent technological developments, such as the cloud, big Exhibit 11: Internet and social network usage via 2000 2014 data, social networks, geolocalization Music, films •• CD, DVD purchases •• Subscription for 80% of music will be digital in 2017 PERCENTAGE OF RESPONDENTS SURVEY, 2012 •• Own infinite content services, the apps economy, mobile 100 •• Collect •• Always with you payment systems, canning/bar codes, Shop, services •• All self •• All by smartphone 8% “Drive” penetration in five years near field communication (NFC), and 3D •• Time wasted •• Drive in France printing. All of these trends will enrich the 80 •• Time saved digital scope of the customer experience Photo, video, notes •• Dedicated devices •• Always with you 8x more cameras on smartphones vs. and continue to modify purchasing 60 •• Development •• Video + photo + notes traditional market behavior around six disruptions. •• Manual file transfer •• Direct image processing Commute •• One car per person •• On-demand cars 10 million people using the Waze app in 40 •• Map, , TV •• Digital maps two years Internet usage via FIRST DISRUPTION mobile phone •• Real-time traffic 20 •• User generated New demand created by Social network Learn, work •• Listen •• Interactive, free 7x more active members of Wikipedia in ultra-personalized products, usage via 0 mobile phone •• Classes •• Continuous access, 2013 than Encyclopedia Britannica in 1993 services, and suggestions •• Books real-time updating 16-29 years 30-44 years 45-59 years 60 years and + •• Online résumé proposed in real time •• Subscriptions Source Euromonitor, OECD statlink Read •• Piles of copies •• More content 25% reading e-books in 2017 throughout the digital •• Buy at kiosk •• Real time and global and physical journey •• Delays •• Continuous access •• Sharing Digital technology enables increasing Home •• Hi-fi stereo •• Connected objects: keys, 10x more revenues from connected access to information, extremely precise •• On/off buttons alarm, thermostat, TV thermostats by 2020 (1.4 billion market) knowledge of customer behavior, and •• Energy efficiency many more points of contact than in the •• Wi-fi speakers past. Products, prices, and services can Source Navigant, KPCB, Oliver Wyman analysis thus be personalized to the extreme.

16 • New customer experiences, new digital behaviors 17 Suggestions and promotions can be process. On the other, you have TripAdvisor proposed in real time through multiple reinforcing quality expectations with its points of contact via smartphone and rating system. Indeed, a 30 percent rating the (semi)autonomous tablets, and tomorrow through augmented drop represents a 10 percent decline in reality and connected objects. Profiling margins for a hotel package in Europe. algorithms that track digital behavior These new rules of the game no longer vehicles throughout the user’s journey (including apply simply to large e-commerce sites, pages viewed, shopping history, speed but also increasingly to the local market, of scrolling) are already extremely where 40 percent of mobile searches are powerful, like the recommendation engine local, with social networks taking a major (Semi) autonomous connected vehicles will engender a major (subscription video on demand, or SVOD) share (15% in 2011, over 55% each year)6 disruption by revolutionizing the time spent commuting and our used by Netflix, which makes tailored due to their prescriptive influence and real- relationship to the automobile: suggestions that lead to 75 percent of videos time updating. • Innovative virtual driver services (enabling driverless viewed. Tomorrow, augmented reality vehicles to be moved from one point to another) are and the digital and physical journey will revolutionizing the concepts of car sharing and shared mobility, and enabling the creation of new logistical patterns converge, further reinforcing the power and THIRD DISRUPTION and solutions for people with mobility impairments. relevance of suggestions that, thanks to big From continuous connectivity to • Freed of the responsibility of driving, passengers and drivers data, offer an infinite range of new services gaining control over available time will have more available time for digital services. linked to mobility, geolocalization, and interconnection of groups in real time. In the US, people spend three hours a day on What may seem like a science fiction fantasy today is actually their tablet or mobile (80 percent of the time happening, with tests underway in 2014 in the UK and Singapore on apps). But all this connectivity is still in and more initiatives planned for the coming years. SECOND DISRUPTION its infancy. Tomorrow’s consumers will have Unprecedented demands and the capacity to view products using image, These initiatives will initially be directed toward assisted driving greater price sensitivity voice, and augmented reality. Connected (“eyes-on” assistance in traffic jams, speed control), then toward glasses (such as Google glasses) or increasingly autonomous models “eyes-off” with semi-automatic In exchange, customers are much more autonomous or semi-autonomous vehicles systems in specific environments, such as parking lots, highways demanding than in the past, as the balance will increase available connected time by and urban congestion). It is predicted that three million semi- of power between customers and companies saving on commuting by car (80 minutes a autonomous vehicles will be sold in Europe in 2025 (2.7% of global has shifted. Today, customers enjoy day on average for inhabitants of the greater production), principally in the high-end segment7. infinitely more power from information, Paris region) or in the street. The objective prescription, nuisance, and negotiation is no longer continuous connectivity, but and can communicate this in real time on the ability to capture the highest possible social networks. The potentially negative share of each individual’s available time. impact of every pricing or quality error is Urban drivers spend an average of two much higher than in the past. In the hotel hours on the internet every day. Between market, for example, you have Booking.com commuting (1.2 hours) or the 5.6 hours of on the one hand, with 540,000 available potentially available time spent outside the hotels – corresponding to the equivalent home (for meals, sports, and hobbies), the of 110 percent of the US market – providing time that can be captured outside working unprecedented visibility on prices and hours could be increased six fold in the years increasing customer sensitivity in the to come (see Exhibit 12).

6 comScore custom research, 15miles/LBD 2 Local Search Usage Study. 7 Self-Driving Car Outlook 2014 Summit; Press review; Automotive World; Oliver Wyman analyses.

18 • New customer experiences, new digital behaviors FOURTH DISRUPTION complex sales and boost upselling and In the automotive industry, distributors by smartphones and NFC technology. Reinventing the shopping journey cross-selling), showrooms, and so on. are accentuating their efforts to capture A password and a few clicks (or about and the customer experience These trends are taking very different forms customers more effectively on the internet 10 seconds) are sufficient to buy music depending on the industry. upstream in the purchasing process on iTunes. The relationship with devices Many sectors are facing a sudden shift in (including tracking and targeting of themselves is rapidly becoming simplified In specialized retail, brands like IKEA the purchasing behavior of their customers prospects navigating on third-party thematic by the convergence between computers, encourage customers to do it themselves and are forced to reposition themselves websites, capitalizing on internet prospects smartphones, tablets, and even TV screens. in some of the sales process steps, such to avoid being marginalized by digital navigating on brand websites and/or as online kitchen design, creating lists This simplicity of use, adoption or purchase, newcomers. We can observe the same network and online sales). All are developing of furniture from the established design and understanding of these features through phenomenon in each instance. Customers, sales processes that integrate and attempt catalogue, and assembling orders in the social networks has considerably accelerated much better informed than in the past to optimize the combination of physical and warehouse, to make the physical sales adoption rates. It took 11 years to reach the and able to gather much more precise virtual dimensions in order to reinforce the process simpler and more fluid. first million PC customers, compared to nine information on products and services, can added value of physical networks, faced with customers who are now better informed and months for Facebook, and just two months compare prices and collect opinions. This Real estate and insurance players are much more demanding (see Exhibit 13). for Instagram (see Exhibit 16). physical and virtual purchasing journey developing multi-access (online and offline) makes sales strategies more complex and sales models, by setting up insurance But though adoption cycles are faster, redefines the raison d’être of physical brokers with no physical agency or FIFTH DISRUPTION people may subsequently drop new trends sales outlets. Such outlets are turning mandated real estate agents to support Simplification that even faster in the future. For example, the into comparison sites, augmented and their online site and replace traditional accelerates adoption cycles: social network landscape is changing very segmented call centers (to convert more bricks-and-mortar agencies. “all early adopters” fast. Initial players such as Classmates and Friendster have vanished, and Myspace, Exhibit 12: Example of the available time of a French student* New applications are free and their which pioneered social networks in 2004, interfaces are increasingly user-friendly. has only 33 million users today, compared to 1.2h 1.4h Transport , gaming Means of payment are also greatly simplified 110 million in 2007. and Internet

Travel Exhibit 13: New car shopping journeys Sport DECISION ON MY MOBILE INITIAL IDEAS SHORTLIST OF VEHICLES PURCHASING DECISION

Traditional • See the vehicle in the • Read brochures • Test drive at dealership Eating and personal 6x street • Discuss with friends • Discuss with friends care more available time thanks • Ads/TV ads • Visual inspection • Discuss and buy at • Call dealer the dealership Household to augmented reality and connected devices New physical and • Reviews on the internet • Contact with mobile • Visit dealership only to Leisure out virtual journey sales reps physically touch the vehicle of home • • Social media (dealer not much valued, 42% accept limited services) • Complete information 5.6h 3,3h • Online test forum Augmented reality Smartphone on the internet and connected devices • Configuration and ordering online (45% are willing*) * Data subset by standard population 20-74 years. Sample population from Germany, Spain, France and UK Source Eurostat report “How is the time of women and men distributed in Europe?”, Oliver Wyman analysis * Oliver Wyman survey

20 • New customer experiences, new digital behaviors 21 Exhibit 14: Market value trends for drive-thru grocery shopping the in France supermarkets SHARE OF MARKET VALUE PERCENTAGE 10

8 High scenario

6 Another salient example is the development of drive-thru grocery shopping. This channel, invented in France a decade ago, has 4 Low scenario become an inescapable part of distributor strategy. What makes 2 it so popular? Drive-thru is a free service provided to customers to save them significant time (40%) on recurrent grocery shopping. 0 The site features and drive-thru apps accelerate the speed of 2011 2012 2013 2014 2015

selecting recurrent products based on the consumer’s order Source Kantar Worldpanel history. And drive-thru effectively supports distributor strategies to win market share from competitors who do not offer attractive Exhibit 15: Time spent grocery shopping, for a €75 basket* drive-thru solutions. It also facilitates opportunities to personalize TIME SPENT IN MINUTES the customer relationship, specifically by establishing targeted 120 promotional offerings.

90 All of this has a cost. In addition to requiring investments to deliver -41% the service, distributors offering “adjacent” drives, that is, co- located with their stores, suffer from severe cannibalization of 60 sales in these stores, reducing the profitability of the latter. The omnichannel trend creates value for customers but, as the number 30 of drives becomes equivalent to the number of hypermarkets and opportunities to win new market share are shrinking, distributors 0 Hypermarket Drive-thru must continue to search for a profitable long-term multichannel operational model. The challenge tomorrow will be to cope with * Including travel time, product selection, loading, and payment Amazon Fresh, Google, and other players of different origins. Source IFOP, Oliver Wyman analysis SIXTH DISRUPTION age, and simultaneously embed digital Optimized management of networks SUMMARY The Internet of Things or the services into the real world. and infrastructures. The networking of revenge of the real economy devices opens up new opportunities for Smart products dialoguing with their making objects interact and managing The internet is completely transforming our everyday existence little by little each day. New usages are Paradoxically, physical industries seem environment. The Internet of Things enables networks with intelligent infrastructures. spreading like wildfire and, although young people at first glance to be the poor cousins of new applications, such as geolocalization, Schneider Electric is repositioning remain the pioneers, older generations are just six the digital revolution, given the tangible alerts, behavioral analysis, and usage- itself, for instance, in the optimization years behind in adopting these new usages. nature of products sold and often the based invoicing. Airbus has thus developed of energy systems by capitalizing on barrier represented by distribution in the e-solutions, a series of services to optimize “smart grids”. These combine electrical Recent technological developments and new relationship between manufacturers and flight and ground operations (including fleet and digital infrastructures to integrate usages (cloud , big data, social networks, end customers. This situation is temporary, management, engineering, maintenance and interconnect all users (generators, geolocalization, NFC, , and so on) will create however. The potential to connect objects preparation, and flight operations)8. operators, the sales force, and so on) and vast fields of opportunity in the future. All of these to the internet creates a vast palette of Likewise, Sanofi is developing integrated optimize the balance between supply and trends will enrich the digital scope of customer experience technical and commercial opportunities. care solutions connected to smart devices demand and consumption in real time. in a remarkable way, and continue to influence purchasing Equipped with chips or captors, all products used to track blood sugar levels in diabetic and consumer behavior around six major disruptions. now can support data or new services. patients and automatically send alerts to Augmented reality applications are doctors. Coca-Cola has also connected its emerging, supported by massive This revolution, which will become fully New demand created by 75% apparent in 2025 with 80 billion connected beverage dispensers to optimize logistics investments, by Google for one (including 1 ultra-personalized offerings Percentage of video selections human- integration, digital and suggestions proposed in (SVOD) chosen from objects (and perhaps 500 billion in 2030), and maintenance. And there are immense real time recommendations made by will push industry straight into the digital opportunities for connected cars. assistants, and connected homes and the Netflix tool vehicles). Some manufacturers, like BMW, Unprecedented demand 110% 2 for quality and sensitivity to Proportional share of the US which equips mechanics with augmented price due to the accessibility hotel market represented by Exhibit 16: Period to attain the first million users reality glasses to help them visualize of information and the 540,000 hotels listed on prescriptive power Booking. com 11 years parts to dismantle, have already found Six times more available 6x operational uses for these applications. 3 connected time, thanks more available connected to augmented reality and time, thanks to augmented connected objects reality and connected objects Tailored services. When it comes to Reinvention of the physical over 8% 7 years services, connected digital bracelets, 4 and virtual shopping journey The share of drive-thru in the and customer experience, supermarket industry in 2015 scales, and body sensors open the way which will completely redefine compared to 1.7% in 2011 for much more effective preventative the raison d’être of bricks-and- mortar stores digital medicine. The stakes are Continued acceleration of 2 months huge, since initial experiments in the 5 adoption cycles Period needed for Instagram to US demonstrate savings of 15 to 25 reach the first million users percent on hospitalization among some Bouncing back of tangible 80 billion 9 months 6 industries, which will gain connected objects by 2025 2 months 2 months polypathology patient segments. In access to a vast palette Internet PC Facebook iPhone Instagram of digital technical and (Eighties) (Seventies) (2004) (2007) (2010) insurance, connected homes or vehicles commercial opportunities will help to adapt coverage and prices to through connected objects Source ISC – Internet Systems consortium, company web sites, Oliver Wyman analysis the behavior of policy holders. Source Oliver Wyman research and analysis

8 AIRMAN-web, for example, is a solution to track flight operations live and correct bugs remotely.

24 • New customer experiences, new digital behaviors 25 Exhibit 17: Penetration of onboard connectivity units in newly assembled cars

PERCENTAGE North America the connected car 100 Western Europe Two sample applications Japan 75 China

50 Russia

A scientific approach to spare parts pricing. Spare parts represent India 2 to 5 percent of automaker revenues, but 20 percent or more of 25 their margins. Spare parts pricing today is principally managed on a cost-plus basis. Taking advantage of a larger volume of available 0 data could help manufacturers develop a more scientific approach 2005 2010 2015 2020 2025 2030 to pricing – comparable to practices used in distribution – by taking account of sales and demand trends, brand image, competitor SEVEN MAJOR OPPORTUNITIES IDENTIFIED prices and intensity, and auxiliary services (such as packaging, Safety and remote assistance After-sales service could be improved considerably through remote delivery, and warranty). 1 diagnostic applications, automated calling for assistance, and so on Connected fleet management Originally designed for companies, dashboards provide the entire Better management of customer value. One out of every two 2 range of indicators for the fleet private customers switches brands when buying a new car. Mobility services The car becomes a new platform to offer new services, such as finding Customer value management is still in the early stages, as data is 3 a parking place held back at the dealership level and there is a low level of interaction 4 Navigation GPS and assisted navigation systems, such as traffic forecasts with customers beyond the point of sale. Using customer-generated Infotainment Just like smartphones, cars make apps available to users for music, data would help to reinforce customer value by adapting points of 5 news, and so on contact to each profile. Simpler and more relevant customer access Insurance New opportunities for insurance, thanks to data gathered about users based on fine-tuned segmentation of the database and precise 6 analysis of the profit zones of each segment would facilitate cross- 7 Payment and commercial services These services can be extended to cars selling and help to predict customer needs more accurately (for example, the renewal of leasing contracts before they expire). Source Just Auto, Oliver Wyman analyses For consumers, the advantages linked to offering, then used the best leading-edge NEW COMPETITIVE DYNAMICS, demand are often spectacular technological innovations to turn them into NEW BUSINESS MODELS (see Exhibit 20): iconic products. Quicker, more violent •• Taxis can be summoned in a few clicks, in just half the time. One need only decipher the value created by the product to understand how it •• Supermarket drive-thru systems based on predefined lists makes works. Offshoring assembly (“made in grocery shopping 41 percent faster China”) represents only 1 percent of the Digitalization is rewriting the rules of Exhibit 18: Speed of penetration of AmazonSupply in the US for a similar price. value generated over the product lifecycle; dynamic competition. Quicker and more •• Car-sharing systems are 90 percent production represents 15 percent of the value NUMBER OF AMAZONSUPPLY PRODUCTS ONLINE violent, these changes cut across historical 1,250 K cheaper than owning a car. generated. That leaves 83 percent of the industry barriers and geographical borders. value in the US for design, commissions, and Using global platforms that create a cost and 1,000 K application-linked services (see Exhibit 21). competitive advantage, digital players are TECHNOLOGICAL 750 K able to project their model without concern TRANSPARENCY for borders, provided the demand exists. SECOND PATTERN 500 K Although technological trends seem to In just a year, capitalizing on its existing be at the heart of the digital revolution, From transactional to 250 K B2C infrastructure, AmazonSupply has they are often nonetheless invisible to interactional, the battle for positioned itself in the enormous B2B consumers. This customer-focused strategy the customer relationship 0 market for spare parts by putting over drives intuitive usages favoring self-taught June January July December Digital models have focused historically on 2012 2013 2013 2013 one million products online at extremely models – like the NEST thermostat – erasing aggressive prices (see Exhibit 18). While it all technical complexity for users (no highly transactional models (comparison, SELECTION OF PRODUCTS IN A FEW REPRESENTATIVE CATEGORIES took Walmart 45 years to deploy its stores more ten-page user manuals for a remote transaction, payment, distribution). With more time spent online, interactional AMAZON GRAINGER MSC ANIXTER OFFICE across America, Amazon will be able to control). Players are also appropriating (US) (US) (US) (EUROPE) DIRECT (UK) serve 60 percent of this territory in less than market innovations more easily to meet models have developed (interactional Abrasives 15 K 10 K 7 K <1 K 15 years. And Amazon is not alone. All the their objectives. Apple did not invent the content, social networks, subscription Fasteners 60 K 56 K ~4 K 110 K major players of the web are growing at an different used in the iPod and models, for example) and currently Hand tools 55 K 39 K 7 K 1 K annual rate of 10 to 30 percent a year to iPhone, but capitalized on its understanding represent 31 percent of the value of the top Paper 9 K 3 K generate several billion dollars in revenues of customer needs to create a unique 30 digital companies (see Exhibit 22). Note Compared selection of products, December 15, 2013 (see Exhibit 19). Exhibit 20: Advantages linked to demand innovations Exhibit 19: Growth of digital players Though each market has its specific

PERCENTAGE characteristics, it is possible to establish HASSLES SOLVED PERCEIVED ADDED VALUE 210 a general inventory of emerging new Blablacar Easily find risk-free Frequently, 50% cheaper than the train 35% business models. carpooling solutions 120 Zipcar A car when I need it without the hassle 90% cheaper than owning a vehicle -97% of ownership (such as purchase cost, parking, and maintenance) 90 Generally profitable growth of FIRST PATTERN 40% faster than ordering a taxi by phone 10% to 50% (except Amazon), Uber/Taxis G7 A taxi in a few clicks even for the leaders Innovate through latent demand Over 540,000 hotels listed online, -0,3% XX% Booking.com Full hotel selection on one site 60 guaranteed selection and capacity to find the 19% 11% Profits The big winners will no longer be the best value for the money Unlimited offering (25,000 films in the US), 30 8,5% Start-up Netflix A movie suggested in a few clicks 0,4% 23% 17% technological pioneers, nor the market without paying per view, no matter $9 a month vs. 1 film = $4 18% share leaders, but those who understand what device I use to access the service 0 Leaders and solve the existing or latent hassles of Amazon Huge selection at attractive prices Cheapest (apparently) Twitter Alibaba Amazon Ebay King without having to shop around Facebook Netflix Google Rakuten Criteo customers better than the rest and forge an emotional bond with these customers. HomeAway A vacation home without the hassle 30-40% cheaper than residences or hotels

28 • New competitive dynamics, new business models 29 “ALL YOU CAN EAT” OPAQUE ULTRA-PERSONALIZED belief, combining traditional paper with a THE BATTLE FOR CONTROL OF OFFERINGS digital offering actually promotes sales of THE CUSTOMER RELATIONSHIP When it comes to video, media, gaming, IT additional services to customers, which may services or music, digital technology must Taking maximum advantage of better- increase average per-subscriber revenues by The battle to be waged in the coming also be considered as a retention driver informed customers and customer behavior, 35 percent in some segments. However, it years by industries and their digital and a means to increase revenues per many proposals are moving toward more intermediaries will center upon control of takes new skills to understand price elasticity customer. From purchasing service units in a robust models to adhere more closely to the customer relationship. Every player and predictive analysis of customer behavior predefined format, we are gradually moving demand at all times and move away from now has information the other does throughout their lifecycle and according to toward a very broad and flexible range of visible price competition. The goal is no not – manufacturers and service operators their digital maturity over time. content that is accessible by subscription. longer selling objects or offerings that are potentially have access to very detailed Offerings that used to be similar for all strongly dependent upon brands, with information on customer behavior and customers can now be ultra-personalized public promotions and prices visible to ERA OF DYNAMIC PRICING experience (which will be accelerated by in different formats with different prices the widest possible audience, but rather AND PRIVATE PRICING the Internet of Things) and are capable of by customer segment, according to their selling access to broad, multi-format, multi- developing unique services. Digital players, maturity (prospects vs. existing customers, channel, and multi-brand offerings, which To manage increasing price sensitivity (price often positioned upstream in the purchasing for example). These models tend to foster can be precisely tailored to each customer. elasticity) resulting from the high level of journey, understand upstream behaviors brand loyalty – Spotify or Deezer for music, The price of this experience can be adjusted knowledge of consumers (or customers), and have a much more powerful competitive and Canalplay Infinity for SVOD being the invisibly for specific high-value customers companies are developing sophisticated, vision. They will attempt to capture the best-known examples. Yet there are many and prospects. dynamic pricing methods. Combined with relationship from the moment consumers others, such as the new generations of micro-segmentation or profiling, these start searching. The sheer number of users free games (like King) and SaaS9 services The magazine industry is a particularly approaches are becoming one of the major of Google, Facebook, Amazon, and even replacing traditional software applications. interesting example in this regard. The drivers of revenues and margins by enabling Twitter is a factor that enables these players migration toward mixed digital models companies to make the right trade-offs based to threaten, for instance, relationships creates unsuspected value to a market with on historical, competitive, and behavioral established by bricks-and-mortar retailers low historical margins. Contrary to popular data on a highly granular level in real time. with their customers.

Exhibit 21: Value generated by the iPhone Exhibit 22: Digital model trends

VALUE CREATED BY PRODUCTS AND SERVICES MARKET VALUE OF THE TOP 30 DIGITAL FIRMS EXCLUDING APPLE $BN $600 1,600

Commissions SERVICES* 1,200 Apps suppliers 20% Catch-up by emerging countries 83% of value is generated in the US 800 Apple Design (US) Just 13% of added value is Collaborative TERMINAL 80% linked to production Bluetooth (US) 20% of value is linked to Relational 400 Assembly (China) retention services Processers (Koréa) Transactional Camera, GPS (Germany) Other 0 Search 2009 2010 2011 2012 2013 2014e * Revenues generated over three years (average lifespan of the iPhone 3GS) Source “Capturing Value in Global Networks,” University of California-Berkeley study; Apple annual reports; Oliver Wyman analyses, 2010 Source Thomson, Bloomberg, Forbes

9 SaaS: . This has risen fivefold in just five years and will represent a €113 BN market in 2015.

30 • New competitive dynamics, new business models 31 Customer relationship management (CRM) Exhibit 23: Dominant models and volume strategy performance will thus henceforth become a major AVERAGE CONVERSION RATES BY PLAYER TYPE the media driver in securing sales. Indeed, capturing relevant PERCENTAGE OF ONE TIME VISITORS MAKING A PURCHASE information to recruit, develop, and retain customers 8 depending on their profile, order history, and forecasted future behavior will become critical to maintain and develop direct sales. 6 x3,5 Next Issue Media is an independent consortium aimed at editors to facilitate the gradual transfer of content to digital formats THIRD PATTERN 4 (like weeklies, dailies, and e-books) offering $10 to $15 monthly Accelerated growth models subscriptions giving access to the top 70 magazines in the US 2 (such as Time, Glamour, Vanity Fair, People, Fortune, Esquire, and The New Yorker) representing 40 percent of the magazine market. DOMINANT MODELS AND

In the first three months alone, 100,000 subscribers signed up, and VOLUME STRATEGIES 0 this service captured more value from the 115 million customers of With 2.9 billion internet users, which will certainly Global Top 10 Top 25 Median regional the consortium by facilitating cross-selling and reinforcing loyalty platforms platforms grow to 4.3 billion by 2020, digital models are through complementary retention. But most importantly, it helped extremely scalable. The fact that bandwidth costs have MARKET SHARE OF LEADERS IN THEIR INDUSTRY to strike a new balance with distributors, whose commissions may dropped by a multiple of 40 and processing costs by a PERCENTAGE represent over 50% of revenues10. 100 multiple of 60 in recent years makes this even truer11.

ONLINE COPIES INTERACTIVE CONTENTS The scalability of internet distribution now favors 75 Value Proposition 1-5 titles, PDF copies 70 more titles, interactive content the leaders in particular – it’s a case of “winner

Customer Base Unchanged 16% higher conversion rate take all”. Conversion rates between leaders and Profit Model Unit price of online 12% more cross-selling: “all you can challengers may vary by a factor of two to five 50 content, with discount eat” subscriptions (up to 8 percent for large platforms compared to Loyalty Unchanged 26% higher retention rate 1.5 percent for challengers), which mechanically Distribution Leadership of Control of the customer relationship 25 device suppliers and customer data reduces distribution costs. Although it is important to consider the massive SEO and SEM investments of these leaders (in 2013, Priceline spent over $1.1 BN 0 on purchasing key words), the distribution costs of Video Search Social Music leaders are estimated to be much lower than those streaming site engine networks platform Youtube Google Facebook iTunes of challengers, creating a growing competitive advantage over time (see Exhibit 23). Source Wordstream, company information, Oliver Wyman analyses

This is indeed the strategy of players like Amazon (and many others), whose price algorithms generally involve applying the lowest market price. Referenced products, whose price ranges are predefined, are automatically readjusted with web scraping, and the system can respond to a competitive price drop in less than an hour.

11 Goldman Sachs, 2014, Software and the IoT: Platforms, data, 10 Oliver Wyman: EDC, Next Issue Media, A New Digital Future for Publishers? and analytics.

33 To reinforce their hold on customers and development) to capitalize fully on all asset-light ownership methods are create smart factories with 30 percent optimize their distribution costs, digital digital drivers and help physical teams hence developed in many B2B and B2C higher productivity. leaders develop marketplaces by industry combat newcomers in this ultra-dynamic, industries to accelerate the growth with the requirement that prices be lower borderless context: of players in dynamic markets with a Lean factories with zero inventory will be lower-risk model, but also to amortize than any other channel. made possible by the complete digitalization •• Reinforce the professionalism and their growing overhead required to of the customer relationship. In some cases, expertise/reliability and quality of develop the necessary global sales and The structural advantage of the leaders, renewal will be proposed automatically to internal services, such as CRM covering marketing platforms (see Exhibit 24). but also the proliferation of offerings and infrastructures, tools and experts in data customers and corresponding production sites, naturally tends to herd consumers analysis, and data analysts. Many drivers are not orders sent straight to the . toward a few winners. When all is said and •• Accelerate international development yet fully tapped across all industries and Small batches tailored to customer needs done, only two or three players can survive by pooling scarce resources – for geographies. In this regard, France, for in each industry with impressive market example, marketing, data analysts, example, is lagging noticeably behind the will become possible with 3D printing. This central purchasing pools, centers of share. What seemed unthinkable in the US, with a differential of about 30 percent. process is growing by 23 percent a year, and is old economy is nonetheless happening technological excellence – to serve expected to represent a €10 BN market (over today in an unregulated digital world. markets that lack critical mass or the 30 percent of which will be in Europe) in the necessary local skills. Major countries haven’t allowed dominant FOURTH PATTERN world of 2020. 3D printing is more flexible and positions since Standard Oil was broken •• Integrate competitors laterally to reduces industrial waste and accelerate control of a link in the value Industry 4.0 and digital production up into 34 separate companies in 1911, costs, while cutting innovation cycle time for chain. Microsoft and Cisco, for example, because it controlled 91 percent of oil recently concluded a partnership to In the next decade, the development of new concepts by 30 to 50 percent compared production in the US. align and reinforce the integration cyber-physical systems (CPS), in which to the process of commissioning prototypes. of their products and operations on IT systems collaborate to command and General Electric projects that it will realize 50 Although they already control over 50 the cloud and data-center markets. control physical entities, will be used percent of its global production through 3D percent of the market in their segments, Comic book players, for example, to digitalize industrial processes and printing by 2020. these leaders continue to capture even more invested jointly in “Izneo,” a shared year after year, and earn even more, like distribution platform. Google, which, with 67 percent in 2013, still Exhibit 24: Compensation for management models/franchise fees managed to gain 1 percent in a year. The importance of platforms rests first and FRANCHISE FEES PAID TO THE CORPORATE CENTER foremost in their ability to reinforce the PERCENTAGE OF REVENUES transformation of the service offering and 16 PLATFORMS ACROSS THE the , and to accelerate the ENTIRE VALUE CHAIN TO international growth model. ACCELERATE DEVELOPMENT 12 •• Move from B2B models to B2C models, One of the key factors in digital models in order to develop a direct relationship thus involves developing, testing, with end customers (for example, 8 develop home delivery platforms for and reinforcing platforms in the home products that stores do not carry for the environment or laboratory and deploying intermediary distribution community). them worldwide as fast as possible. 4 •• Move to franchise/management (“asset light”) models to limit These platforms far surpass the traditional investment costs and accelerate 0 distribution or cost optimization sphere. international development. Operational, Catering Corporate Hotels Restaurants Professional These platforms can be created for each commercial, or distribution support operations services services dimension of the value chain (interactional platforms make the value created by platforms, operations, shared services, the franchiser more transparent. Such Source Oliver Wyman analyses

34 • New competitive dynamics, new business models 35 SUMMARY A new generation of smart robots and digital command tools will render production lines DIGITAL TRANSFORMATION OF COMPANIES more interactive, autonomous, and versatile. More than a transformation, a profound migration Digitalization is rewriting the rules of competitive SAP, for example, is developing production that must be managed over more than a decade dynamics. Indeed, the global platforms supporting the lines to manufacture initially identical plastic cost and competitive advantage of digital players enable cases, which can be transformed at will into the latter to project their model without concern for remote control units or mobile phone cases. industry or geographical borders, provided they find sufficient demand. All the major players of the web are Finally, logistics will be entirely integrated After a decade, it is difficult to identify the real ISOLATED MODEL growing by 10 to 50 percent a year, with revenues of and connected to production tools to success stories in the digital saga. There are a optimize flow in real time. Products several billion dollars and often good profitability. Though few examples, but they are actually quite rare: In less mature markets, attracting and themselves will make systems more each industry is different, a few key models are emerging. Apple is one, Netflix is another. The reason is retaining talent is difficult in traditional efficient by sending alerts and instructions simple: digital transformation isn’t a company cultures where interests do not necessarily New technologically transparent offerings focused to distribution stations, concerning their project that can be conducted in a few years, converge concerning how to build a on latent demand. The deck has been reshuffled and location or destination, for instance, or the multichannel strategy or simply manage the but a long, gradual migration on the scale of a the winners of today are no longer the technological required packaging or handling operations. pace of very different types of businesses. decade, with very different success formulas. pioneers of yesterday. Instead, they are the players Some companies have decided to isolate Many obstacles must be overcome before who understand and solve the existing or latent hassles digital structures from the rest in order to the factory of the future can emerge: Given these long-term challenges, and of customers better than the rest, and who create an protect their dynamism. Such a solution has technical (CPS systems, , even though some changes seem rapid, it is emotional bond with these customers. many advantages by enabling firms to: virtualization, high-speed infrastructures, difficult or even dangerous to rely exclusively Interactional models or the battle for control of the safety), strategic (business model redesign, on existing best practices and skills in a •• Develop a digital culture able to attract customer relationship. Offerings that used to be similar investments), and especially human (internal given industry. Leaders must answer three top talent for all customers can now be ultra-personalized, with skills, supplier reticence). Nonetheless, essential questions to negotiate their digital •• Manage the digital migration invisible pricing differentiated by customer segment Germany, for example, is one country that transformation successfully. over a decade while preserving according to maturity. The battle waged by physical has decided to spearhead this effort. Angela historical channels industries and their intermediaries will be centered in the Merkel’s government has launched an •• Invest directly in new geographies with a years to come on control of the customer relationship. ambitious plan in this regard, funded by FIRST QUESTION purely digital model Each player now has information that the others do not €200 MM in public and private investment. What digital transformation •• Adapt to market dynamics more agilely and will leverage this knowledge to optimize recruitment, The first applications are expected for 2015, model should we use to manage and autonomously without being development, and retention of high-value customers. and full migration by 2025. very different company cultures hindered by historical operational or and paces? governance models Accelerated growth models. With 2.5 million available This transformation is far from over. Digital •• Once critical mass has been internet users, digital models are eminently scalable, penetration remains low in European attained, infuse best practices into especially since distribution costs largely benefit the companies. In 2010, 35 percent of European INTEGRATED MODEL historical structures. leaders in each market (three times higher conversion firms with more than 10 employees used rates). The creation of global commercial, interactional, the internet to make purchases and only 18 In industries where digital penetration has In insurance, Axa Global Direct manages all and support platforms across the production or value percent to sell products and services12. reached a first level of maturity (15 to 25 of the AXA’s digital businesses in its historical chain will enable the deployment of new accelerated percent internet penetration), most digital geographies, but is also the spearhead of “asset light” growth models akin to franchises. operational structures are observed to be the group’s lower-cost penetration strategy integrated into historical operations. in emerging geographies, where demand Industry 4.0 and digital production. In the next is built directly online – as in the enormous decade, the development of cyber-physical systems This has happened in the travel, airline, hotel, Chinese market. (CPS), where automated systems compete to online gaming, and media industries. Publicis, command and control physical entities, will enable the for example, initiated digital transformation In banking, BBVA created a digital innovation digitalization of industrial processes and give rise to ten years ago and digital services currently division to which it entrusted responsibility smart factories offering 30 percent higher productivity. 12 OECD, 2012. represent 40 percent of its business. for the profit and loss account (P&L) on a new

36 • Digital transformation of companies 37 market, Chile, where the group was absent. Innovation has changed considerably. It has Innovation at every level to accelerate throughout the development cycle: The result was a fully digital bank offering become much more entrepreneurial and no cycle times. Some go even further and business specifications, interim reviews, customers new innovative services, such as longer requires large infrastructures. Most involve the entire organization and even the and so on (like Google). the possibility of transferring money between of the million mobile applications available community in more or less formal models. •• Finally, other drivers can accelerate Facebook accounts (BBVA Link service). today were created by start-ups less than At Google, employees are allowed to development processes through But this division also works to develop ten years old. devote 20 percent of their time to personal franchise models or reinforced partnerships, or even “coopetition” applications for the entire group, which it projects unconnected to their professional (cooperation + competition) with Starting from this observation, some tests in beta form on a certain number of duties. If these projects result in significant digital competitors. customers whose reactions are recorded. industry and service players have decided innovations, they are largely recognized to rethink their models deeply and adopt and rewarded. Innovation contests are also Test and learn from development to Supermarkets, for which the consumer and the entrepreneurial innovation model. developing within and outside business commercialization. Understanding behaviors competitive stakes are enormous, are now Less structured, more random and more organizations. Netflix launched a million- and testing concepts form an integral part at the transition point between two models. iterative, many such initiatives have seen dollar contest in 186 countries with 40,000 of some models. Improved conversion rates Some distributors have migrated toward an the light of day. candidates to improve the efficiency of its have driven some players like Booking. integrated model, while most of the others recommendation engine by 10 percent. com to reserve 10 percent of its volumes for have not yet taken this step. Incubators and accelerators. Many continuous testing (the A/B test process). structures have been created in a few short Accelerate IT developments (“no more However, the following stage remains years by large industrial and service groups. cathedrals”). IT development strategies complicated for isolated models. The Their professed objective is to gain a better have also become much more agile under THIRD QUESTION dissemination of digitalization to the entire grasp of market trends and be able to detect the influence of web players by involving How can we transform organization, ultimately necessary in the future champions rapidly, by absorbing more of the organization at every stage. large corporations? end, is a major challenge. winning business models and internalizing •• . Cross-company the skills: Merck’s Global Health Innovation “Agile development” teams using iterative methods to The new digital era puts large corporations Fund, with a budget of $500 MM, has already SECOND QUESTION improve specifications and solutions head to head with unprecedented challengers invested in over 20 start-ups (such as health through better collaboration, using like Google, Amazon, and fab labs14, while the How can we integrate informatics and personalized medicine). application program interfaces (API) former have inherited a legacy of structured entrepreneurial innovation? Michelin, with the creation of the Incubator to mine for basic features in standard systems and organization to standardize Program Office, as well as BMW, Deutsche platforms, can reduce the development processes, reduce risk, and manage safety, in Forty years ago, the champions of innovation Telekom, and Orange have established units capacity needed to launch new products a long-term perspective. were industrial leaders or major public- to fund digital start-ups. by 30 percent (like PayPal). This sector structures such as IBM, Bell, NASA, approach enabled US cable operators, Before being technical, the digitalization for example, to market three new and DARPA. A considerable number of Acquire key skills. In a context dominated by challenge is thus transformational. To products a day, rather than one a month. and patents were generated big data, data scientists are in short supply capitalize on the corresponding opportunities, in their labs, including the advent of the (that is, data experts or statisticians able to •• Time-to-market can be accelerated by large corporations must hence revisit their creating small product-line teams cutting internet, water purification, infant nutrition, manage and analyze colossal volumes of strategic vision in light of digital stakes and across the organization and responsible and satellite . Today, data). The race to recruit the right digital for short-term (often quarterly) business undertake a profound transformation of the the principal internet magnates13, many skills is another key factor in corporate digital objectives for their assigned product line organization. Indeed, digitalization upsets of whom did not exist 15 years ago, are strategies, particularly since the experts (like HomeAway). the formal dimensions of large organizations valued at nearly $1.1 TN thanks to major predict that the US will lack 60 percent of •• New functions are emerging, such (such as their internal processes, human innovations. The difference? They all started required data analysts – or 200,000 jobs – by as the product marketing function, resource (HR) models, and governance) as in a garage or college dorm a few years back. 2020 and lack over 1.5 million managers and which relies on dedicated resources to well as the more informal aspects (such as the analysts with the required digital skills. align marketing and product objective leadership model and culture).

14 Shared production workshops or fab labs, provide entrepreneurs, craftspeople, and individuals of all kinds with tools, specifically 13 Google, Alibaba, Amazon, Twitter, Netflix, LinkedIn, Facebook, eBay, Priceline, Yahoo. -driven machine-tools, to design and produce objects (prototypes, small batches, or spare parts).

38 • Digital transformation of companies 39 UNPRECEDENTED a third of the company workforce), of BUT UNSURPRISINGLY, THE •• Behavior: Identify and underline OPPORTUNITIES TO SHAKE which 65 percent are also members of ORGANIZATION IS ALSO existing behavior that is particularly UP ORGANIZATIONS various communities, a good sign that THE PRIMARY OBSTACLE aligned with a digital culture and the tool is being used. There are different TO THE DISSEMINATION promote new desired behaviors (such Organizational improvement opportunities circles – communities of expertise, OF DIGITALIZATION as entrepreneurial spirit, transversal offered by digitalization are numerous: communities of interest, communities practices, collaborative work, openness of engagement – created by the Structural complexity, hierarchies, silos, to the outside world). •• By breaking down internal silos, company itself to facilitate dialogue with •• Exemplarity: Including the company digitalization promotes closer internal policies, vested benefits, specialized employees. Several hundred employees leaders who, sensitized to the stakes collaboration between marketing processes, and established operating keep a blog, and company leaders of digitalization and the importance of and CRM, between research and practices are all enemies of change. themselves share their thinking and ask transmitting this message, must set the development (R&D), marketing and the people for advice on these pages. Yesterday, power was in the hands of a example, akin to Jean-Pascal Tricoire at production division, and so on. handful of people who held the information. 16 •• Digitalization also helps by developing Schneider Electric . •• By facilitating access to training and Tomorrow, and even already today, useful communities with the outside world •• Openness to the digital world, learning, through e-learning and now (customers, influencers, suppliers, and reliable knowledge is more easily by engaging in initiatives such as the emergence of corporate open online partners, and so on). available to all, challenging the status quo. “learning expeditions,” for example. courses (COOC), more individualized The result is latent resistance, sometimes and hence richer development paths •• It opens up opportunities by expanding •• HR processes and specifically training: conflict, or even outright rejection by the old become possible. the scope of experimentation, by rapidly Rather than forbidding or closely testing beta versions of future offerings guard toward internet-native newcomers monitoring the use of social media, more •• By fostering the emergence of grafted onto the organization. and more companies, like , train their communities within the company, with targeted populations, as pure digital employees in their use. because globalization and continuous players do with their employees. connectivity paradoxically reinforce •• It accelerates decision-making processes •• The work environment itself, which the need to form tribes, digitalization and reshuffles the deck on roles and CULTIVATING A DIGITAL can be inspired by that of internet-native restores closeness and authenticity with responsibilities within the organization, CULTURE WITHIN players: The remarkable originality a smaller circle. As an example, BASF’s with the establishment of self-organized THE ORGANIZATION of the workplaces of leading digital social network, BASFConnect, has networks alongside hierarchical players is not just a matter of resources; Managers are aware that transforming the 35,000 registered members (or nearly structures (see Exhibit 25). it’s also a different way of considering corporate culture is critical – 63 percent of the work environment. By establishing managers cite this as the most important informal collaboration spaces and a Exhibit 25: Management model trends challenge of the digital transformation15. “fun” environment, companies make STRATEGIC And people must not merely tolerate the employees want to get more involved. ENVIRONMENT Stable environment Unstable new digital world, but actually embrace its various dimensions. Cost strategy Growth ABOVE AND BEYOND THE

STRUCTURES/ CULTURAL DIMENSION, MANAGEMENT Many hierarchical In terms of cultural change in general, and levels Flat hierarchy GRASP AND STRUCTURE THE PROCESSES the development of a digital culture in TRANSFORMATION AS A WHOLE Functional silos Network particular, there is no ready-made, one-size- fits-all formula. Everything depends first In a certain number of cases, large Autonomous Centralized decentralized on the starting point – taste for innovation, corporations will have to align their decisions decisions appetite for change, or, conversely, aversion structures and operating practices and Weak leadership Strong leadership to risk. It is nonetheless important to move toward a more horizontal, network

INFORMAL Collaborative and combine various key drivers: organization to permit the development INTERACTIONS Many formalized informal practices processes networks

Hierarchical Participative decisions decisions

Mechanistic “Living organisms “Muted organisms” “Neuronal networks” bureaucratic (natural selection)” Clear Channel Google TO en ligne EU L’Oréal, General Electric 15 Study by Altimeter, “The 2014 State of Digital Transformation.” 16 Survey by Enjeux les Echos, ranking Schneider Electric as “the most digital” company of the CAC 40 index.

40 • Digital transformation of companies 41 SUMMARY of autonomous business units open to outside partnerships, specifically with CONCLUSION technological partners. Turbulence caused by the “massification” of digital The digital transformation is not a three-year project, but a long migration on the scale of a decade. Faced with HR models will need to change, specifically this long-term challenge, the key to success resides in to attract and retain key talent. By analogy establishing specific key drivers: with the “customer journey” in which the • Decide on the digital transformation model various points of contact and the quality WE ARE ENTERING THE ERA the coming decade and become active, (integrated or isolated) to manage sometimes very of the customer experience are analyzed, demanding users. different company cultures and paces. it is possible to develop the concept of the OF DIGITAL MASSIFICATION • Completely rethink innovation using incubators, “employee journey” to ensure the well- E-commerce represented a $1.01 TN market These already visible trends will continue recruit new key competencies (data analysts, being of employees during their time in the in 2013, growing at an average annual to accelerate under the influence of two for example), and establish new development organization. Internet-native companies, rate of 17 percent. Digitalization, which is concomitant waves. and marketing practices (test and learn, agile which focus on the “user-centric” dimension development, and so on). integrated into most industries, is more in their internal processes, can once again difficult to measure. Estimated today at Deployment of smartphones. These • Accelerate development of the digital culture across serve as inspiration. are becoming more widespread and will the company. Digitalization effectively upsets the about 5 percent of global GDP, it is expected to represent at least 10 percent by 2025. accelerate internet connectivity and hence formal dimensions (internal processes, HR models, Given the stakes, leaders must implement governance, and so on) as well as the informal e-commerce (mostly m-commerce in the a complex digital transformation agenda dimensions (such as the leadership model and Gradually, all domains of economic activity, future) with emerging countries making culture) of large organizations. There are many to be conducted over a number of years. social and cultural life, and citizenship will up for their current lag. Over 230 million opportunities to transform large companies but, This must be based on a shared conviction be affected by the digital services that we new internet users are recorded worldwide unsurprisingly, the organization is also the primary by senior leaders on the diagnostic and the use every day. All countries, social classes, every year, or the equivalent of the entire US obstacle to the spread of digital technology. The vision, and be supported by broad-based and age groups will access networks in market (see Exhibit 26). objective is therefore to make sure that people do employee engagement. not just tolerate the new digital world, but actually embrace the various dimensions of this change in Exhibit 26: Internet penetration trends G7 and BRIC, 2008 to 2012 their behavior, processes, HR models, and the work environment itself. PERCENTAGE 100 Finally, the frequent complexity of the digital +3,4%* +1,3%* +4,6%* * transformation agenda means that the vision and +3,1% +1,2%* agenda for change must be shared by senior leaders and broadly supported by company employees. +6,7%* +19,0%* 50 +11,2%* +17,5%*

Penetration delta +31,9%* 2008-2012

0 Penetration 2008 UK Fr. US Italy Brazil China India Ger. Japan Russia G7 BRIC POPULATION

* Annual growth Source Data.un.org, Oliver Wyman analyses

42 • Digital transformation of companies 43 Maturity of online buyers. The more chain tomorrow. Largely underestimated, TAX CHALLENGES IN take best advantage of tax system disparities frequently people buy online, the more because they are more difficult to measure THE DIGITAL WORLD across different countries, specifically through they tend to buy across national borders. In than manufactured goods (60 percent of the choice of their head office location. this context, imports may easily exceed 50 trade services are not integrated into public Digital players can optimize their taxes much (International law gives companies the right percent, as observed in Europe in particular statistics17), 28 percent of exports today are more easily than traditional industries. As a to have their profits taxed in the country (see Exhibit 27). services in the US. Over the last decade, consequence, the growth of digitalization where the head office is located, rather than average service exports grew from 7 to 20 is a source of progress, but puts great where the business is exercised18.) SERVICE GLOBALIZATION, percent per year (see Exhibit 28). strain on major industrialized economies. Although digital companies are not alone Most companies and countries thus have NEW RULES FOR When considering all types of exports, it is in attempting to optimize their taxes, it just a few years to integrate these new THE COMPETITIVE probable that services will represent over is much easier for them to transfer their challenges and position themselves on these PLAYING FIELD half of international trade by 2020. The very profits to tax-advantageous countries by new business models, which attract more notion of national competitive standing will remunerating intangible assets whose value than 50 percent of venture capital investors The digital economy will turn the rules of be shaken, for example, as more services are is multiplied by the scale effect. In contrast in the US today19. It is high time to build the the old competitive game upside down. offshored in the years to come. to older companies, which must generally global champions able to hold their own in For example, the service economy – which be restructured to optimize taxes, the digital an eminently open and still largely under- represented 53 percent of global GDP in While up to now, globalization has affected economy is organized from the outset to regulated global supermarket. 2010 – will be particularly impacted. Long only industry, with the impact that we have seen as local and difficult to export, many seen over the past decade, tomorrow, core service industries will nonetheless be consumer and business practices across the Exhibit 28: Service exports by country in the past decade

able to export at least part of their value entire economy will be shaken by turbulence. BY COUNTRY $BN 2,000 Exhibit 27: Domestic and cross-border online purchases CAGR x2,6 03 13 CROSS BORDER ONLINE PURCHASES 1,600 PERCENTAGE OF USERS India +20% 70 1,200 France +9% 60 LU China +16% 50 800 UK +7% 40 400 AT Germany +10% 30 FI IE DK 0 US +9% 20 BE 2003 2005 2007 2009 2011 2013 FR NL 10 EU UK PT ES DE IT SHARE OF SERVICES IN OPERATIONS BY COUNTRY 0 US GERMANY UK CHINA FRANCE INDIA 0 20 40 60 80 100 2008 28% 15% 37% 9% 22% 37% ONLINE PURCHASES PERCENTAGE OF USERS 2013 30% 17% 35% 9% 29% 31%

Source Eurostat, Community survey on ICT, 2012 Source International trade statistics, WTO, International trade center and Oliver Wyman analyses

18 Large international digital economy businesses currently operate based on commissions. The revenues generated in France, for example, are received by their structures based outside France. The French subsidiaries pay tax only on a base equal to operating costs plus 5 or 10 percent. This aspect is particularly important when it comes to the commercialization of digital content (such as music, 17 Oliver Wyman study, “Globalization of Services,” 2011: Revenues linked to electronic commerce are particularly difficult to track, notably VOD, and e-books). Although France has been able to catch up in terms of VAT on e-books, no similar measures have been taken for purchases made on platforms hosted in certain tax havens. Others defy any attempt at tracking. This is true for revenues linked to concerning online music sales or VOD. operator roaming agreements, for example. 19 OECD.

44 • Conclusion 45 4 KEY QUESTIONS TO GAIN A BETTER UNDERSTANDING OF THE DIGITAL TRANSFORMATION OF YOUR COMPANY

How do you foresee the digital transformation of your industry? • What part of the value chain is the digital culture penetrating in your industry? What are the consequences? • Do you have a clear vision of the next stages of digitalization? • What threats and opportunities do you see inside or outside the historical perimeters of 1 your industry?

How will the customer relationship and purchasing behavior evolve in the coming decade? • Based on observations of new technological opportunities (through, for example, connected objects), what might the purchasing journey and the customer relationship look like in five and in ten years? 2 • Which digital players are likely to penetrate your industry, in one way or another, by capitalizing on these new behaviors?

What new economic models will you use? • Which start-ups, innovative products, or services could win big by satisfying a latent need of your customers? • What types of platform (operational, commercial, or relational) must be developed to secure sales and accelerate international development? 3 • How can you secure your customer relationships throughout their lifecycle? How could you make your value proposition more relationship oriented? What models could be used to tailor your products and services and reinforce customer loyalty? • How does digital technology fit into your production model? What cost and quality gains could be obtained as a result?

How have you initiated the digital transformation of your company? • Have you chosen an integrated or isolated model? • Have you revisited your innovation model (incubation, acquisition, recruitment of new critical skills)? 4• How can you accelerate your time-to-market model? • How are you accelerating the digital culture in your organization (HR models, processes, governance, work environment, training)? Oliver Wyman is a global leader in management consulting. With offices in 50+ cities across 25 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm’s 3,000 professionals help clients optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.

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CONTRIBUTORS

AUTOMOTIVE DIGITAL, TRAVEL & LEISURE ORGANIZATION EFFECTIVENESS REMI CORNUBERT MURIEL SCHTICKZELLE NATHALIE CHATELIN [email protected] [email protected] [email protected] MARC BOILARD [email protected] FINANCIAL SERVICES RETAIL & CPG JACQUES-OLIVIER BRUZEAU BERNARD DEMEURE B2B SERVICES [email protected] [email protected] HUGUES HAVRIN DAVID GIBLAS XAVIER MUSSARD [email protected] [email protected] [email protected]

COMMUNICATIONS, MEDIA & TECHNOLOGY INDUSTRIAL PRODUCTS TRANSPORTATION EMMANUEL AMIOT XAVIER RUAUX GILLES ROUCOLLE [email protected] [email protected] [email protected] GUILLAUME THIBAULT [email protected]

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