This article is the eighth of a series sponsored by PNC Bank engaging with CEOs from around the U.S. on some of the most important topics facing business leaders today. Part one focused on tax reform and global competitiveness, part two looked at technology transformation, part three examined strategies for growth, part four discussed cost-cutting, part five covered cybersecurity, part six covered talent-related challenges and part seven on healthcare.
Digital transformation has emerged as among the most important issue of our times for CEOs. Whether their companies can withstand sweeping technological disruption, leverage artificial intelligence and pursue a new vision for the company as a digital leader has become a key determinant of success in this era for leaders in legacy industries that range from agriculture to oil exploration, from banking to manufacturing.
Already, companies that have bridged such a “digital divide” are generating net income that is 15 percent higher than peers, according to recent research by Alix Partners and MIT that was presented at a Chief Executive Group event. And many in a group of more than 500 CEOs recently interviewed by McKinsey said that they believe technology can improve business growth and productivity enough to lift profits and shareholder value by as much as 50 percent in the years ahead.
Besides the business imperatives, another driver of this phenomenon will be how digital transformation dovetails with the world’s overall economic and social evolution. Digital transformation of industries could contribute as much as $100 trillion in combined value for both industry and society by 2025, according to a recent study by the World Economic Forum. That includes a potential value of $12.7 billion from the digital overhaul of just four industries: automotive, consumer, electricity and logistics.
“Everyone’s talking about it and knows about it, but very few CEOs actually have a bona fide digital strategy,” says Chris White, CEO of the Americas for Signify, formerly Philips Lighting. “They know they need to get on with it.”
Here is how White and the CEOs of two other major companies, leaders in their verticals, have been spearheading the digital transformation of their enterprises:
Charlie Young, CEO, Coldwell Banker: Few industries have faced such a disruptive technology overhaul as the selling of residential and commercial real estate. The online democratization of the once-sacred “multilist” of houses for sale has made the home-selling and buying process much more transparent for consumers, has invited many startups that are serving them listing information, and has challenged the traditional functions of brokerages like Coldwell Banker.
But Young has been determined to leverage growing digital expertise with the brand’s historic heft in the market to make Coldwell Banker a leader even in the new age. In fact, the brand was the first national real estate brand to put its listings on the internet. And now Madison, New Jersey-based parent Realogy – which also owns several other brokerage firms, including Century 21 – invests $200 million a year into technology.
Young’s approach to technology begins with why the company is in business. “There’s been a lot of disruption in our industry that’s been driven by technology, and it’s very common for players to enter this industry, or even long-time companies, and say that they’re a technology company first and foremost,” Young says. “But we’re a real estate company, and we utilize technology to solve problems and to enable our agents to better serve customers.”
So, for instance, Coldwell Banker has digital platforms that crunch data with artificial intelligence and machine learning to help realtors and sellers predict likely buyers for their listings – and engage low-cost social-media marketing to target them – as well as predict which homes are likely to come on the market in the next year.
“We can predict the likelihood a home will go on the market before the person who lives in that home will take action,” Young says. “That gives us first crack at the inventory.”
Chris White, CEO, Signify: First LED transformed the lighting industry and now digitization has brought the second huge wave of change, with Somerset, New Jersey-based Signify – a unit of Netherlands-based Philips NV – emerging as a leader in “connected” lighting.
In fact, since White came to lead Signify in early 2018 from a 20-year background in Silicon Valley, he has committed the company to achieve a product line that is 100 percent connected to the Internet of Things or otherwise digitally plugged in, or connectable, by 2020.
One major effort has been to rebrand Philips’ home-lighting products as Hue, “digitally enabling” the commodity light bulb and “turning it into an experience” for mood alteration, home protection and other extended functions of lighting. White also has been overseeing the refinement of Signify online from a mere sales and marketing tool to a “full-blown e-commerce engine to get in touch with millennials,” he says.
White’s attempted transformation is a continuous process. “We start every meeting off with the question, ‘Is there a digital solution to this problem?’” he says. “Hope [for digital transformation] is not a strategy. You’ve really got to embed it.”
Yet, White notes, in the process Signify tries “not to throw too many people under the bus. You try to bring in talent to accelerate the journey toward certain digital imperatives while bringing internal employees along on that journey.”
Barbara Humpton, CEO, Siemens USA: She was recently elevated to run the Washington, D.C.-based American arm of the German industrial giant and help accelerate a decade-old digitization push across Siemens’ vast range of B2B products, services and operations in verticals from energy to health care, from industrial drives to industry services.
Humpton is spearheading the technology investment of $1 billion a year in the U.S., looking at what they can do to position technologies to be right down the road and sniffing the industrial countryside with a corporate venture-capital fund focusing on digital startups.
In the power industry, for example, where Siemens is a leader in large-scale generation, the company is transitioning to the new era of distributed energy and seeing how digital technologies such as big data for preventive maintenance, and blockchain, can help it adjust.
But Humpton’s biggest management priority may be cultural. “As we restructure the company and create operating companies that are almost like pure plays in their markets, every one has a digital component,” she says. “And so the key question for leadership assignments is: What is the digital quotient of the leader? Not everyone gets it.”
“I’m looking for leaders who recognize there’s a fundamental shift in how customers are thinking, and how they approach their market, how we’ve got to be skating to the puck.”
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About PNC
For more than 160 years, PNC has navigated a steady course while growing in size, sophistication and service. Today, we’re one of the largest, most highly-regarded and well-capitalized financial services companies in the country. We’ve added thousands of corporate clients in the last few years and are expanding our geographic franchise with offices in 36 states, and in select regions around the globe.
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The opinions expressed in this article are not necessarily the opinions of PNC or any of its affiliates, directors, officers or employees. This article was prepared for general information purposes only and is not intended as legal, tax or accounting advice.
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