Anand Swaminathan - Digital @ Scale

Cover Design: Lisa Campabadal and Paolo Donato

Copyright 2017 by McKinsey & Company, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data

Names: Swaminathan, Anand, author. | Meffert, Jrgen, author.
Title: Digital @ scale : The Playbook You Need to Transform Your Company / Anand Swaminathan, Jrgen Meffert.
Other titles: Digital at scale
Description: Hoboken, New Jersey : John Wiley & Sons, Inc., [2017] | Includes bibliographical references and index. |
Identifiers: LCCN 2017020935 (print) | LCCN 2017027250 (ebook) | ISBN 9781119433767 (pdf) | ISBN 9781119433774 (epub) | ISBN 9781119433743 (cloth : alk. paper)
Subjects: LCSH: Information technologyManagement. | Technological innovationsManagement. | Organizational change. | Strategic planning.
Classification: LCC HD30.2 (ebook) | LCC HD30.2 .S9185 2017 (print) | DDC 658.4/0380285dc23
LC record available at https://lccn.loc.gov/2017020935

THE DIGITAL REVOLUTION is here, and no industry is immune from its impact. The good news: all companiesbig or smallcan benefit. German booksellers have grasped their opportunity against a seemingly unassailable opponent.

For 550 years, everything was fine: Ever since Johannes Gutenberg founded printing with movable letters in 1450, the retail book industry largely remained unchanged. The print shop produced the books and delivered them to the store; customers visited the store, browsed through the selection, and bought their reading material. With the dawn of the new millennium, however, a new upstart turned all the rules upside down. It wasnt enough that the online retailer Amazon grew to become the largest bookseller around the world; with its Kindle device, it introduced a reader for electronic books that quickly became popular.

Pure fear gripped booksellers and the management of big bookstore chains throughout the world. They were faced with a disruptive technology and revolutionary change that was upending the old business model. Digitization had reached their industry, and if they werent to be ejected from the market like photography specialist Kodak years earlier, or like mail-order catalog retailers, as well as several travel agencies and newspapers, then something had to be done. Large bookstore chains like Borders in the United States and Waterstones in England had already fallen victim to the Amazon infiltration: they ignored the threat for too long, and then reacted too slowly and halfheartedly.

But it was a crisis with a happy ending for German booksellers. Faced with the pressure of rapid change, the bookstore chains Thalia with Michael Busch, Hugendubel with Maximilian Hugendubel, and Weltbild with Carel Halff, as well as the book clubs of media giant Bertelsmann with Niklas Darijtschuk, had a meeting. According to coinitiator Michael Busch, CEO of Thalia: We needed to establish strong marketing power in the German-speaking area. And since Thalia as well as Hugendubel and Weltbild had been unable to successfully market their own electronic readers in previous attempts, the book retailers now sought the services of Deutsche Telekom as a technology partner. We wanted to build a value chain in which all partners were playing at Champions League level, according to Busch. Together, they developed the Tolino e-reader as a rival to Amazons Kindle, created a Tolino app for mobile devices, and invested in an Internet campaign to market the electronic offering.

The book retailers and Deutsche Telekom followed a strict strategy based on the overriding sense of urgency that the retailers needed to understand precisely why they needed to act. That is, if they didnt tackle the challenge of digitization, their core business would be threatened. Fear spurs you on, as Michael Busch puts it.

So what was to be done? The partners needed a concept to conquer the e-reader and e-book market with the ambitious aim of becoming market leaders. And since customers in the digital world wanted stable and above all, simple processes, Tolino needed to offer a customer experience similar to Apple: that is, intuitive to grasp and with an animated and captivating customer journey across all contact points from first contact to purchase.

How could Tolino meet these ambitious targets? The way not to do it quickly became clear: with existing corporate structures, large committees, and elaborate meeting agendas. Instead, a small core team was given extensive authority and decision-making powers. The most important developments were started at the same time and were based on a two-speed information technology (IT) architecture. A traditional IT structure ensured the stability of all the usual processes and the integrity of important data, while another group was organized in the manner of a start-up company, allowing fast and flexible processing of the many tests, learning steps, and corrections that digital product innovations inevitably entail. Deutsche Telekom, meanwhile, designed the hardware, the actual e-reader. At the market launch in 2013, an advertising campaign ran across all digital channels, focusing on television and social media.