Could "Digital Transformation" have saved Thomas Cook?

Quick answer: No - according to my humble opinion...

Background questions

"If only Thomas Cook would have adopted a Digital Transformation strategy...." Is that so? Is it this simple?

So - where was the Vision? Tim Jeans, a former managing director of Monarch who left long before its collapse, told BBC 5 live Thomas Cook had "an analog business model in a digital world".

What about Culture? Management was unsuccessful in disassembling or reducing the huge debt (but quite successful in reaping large bonuses where the company itself was making huge losses).

What was the actual Strategy? They issued dividends to shareholders in 2017, practically giving away cash to those who had bought shares when the money (and this is subjective) should have been used for cash flow, investments.

What about the Customer? Do customers really still want the "fly me to a hotel, all-in style of vacation" package, or are they looking to live an experience? Did Thomas Cook get that part?

All this and a huge historical debt was and are the 'cement coffin' that dragged Thomas Cook to the bottom of the ocean. Not exactly the environment in which you launch a successful digital transformation initiative.

Digital Transformation is not a life raft

Only 8% of CEO's believe their company can survive severe digital disruption. It's that hard, that impactful. So, could a Digital Transformation initiative have saved Thomas Cook? In this environment? Never - in my opinion. It most likely would have accelerated the downfall. IBM wrote in a 2017 report that "84% of Companies Fail at Digital Transformation". Forbes dives a bit deeper in the subject, and let's lock some of the reasons for failed Digital Transformation initiatives against the Thomas Cook story:

Quoted out of the article "Where Businesses Go Wrong With Digital Transformation" by Phil Lewis:

Why do so many businesses struggle with digital transformation?

A lack of clear strategy: Digital transformation must be set in the context of a clear corporate strategy. But the role of transformation in driving strategy is often poorly defined.

How would Thomas Cook scored?

Ungrounded, uninspiring leadership: Strong CEO and board-level commitment are required, alongside a clear vision and investment in building cross-functional support. But the transformation agenda is often siloed within specific business functions and framed in an unclear or uninspiring business vision.

Bonuses set aside, do you feel Thomas Cook's leadership was a testimonial of effective, strong leadership?

Unwillingness to adapt: The transformation goal must be defined as the adoption of a new, digitally-enabled, business model and culture which itself is dynamic and continuously evolving. But the transformation goal is often defined as the implementation of a new system, process or operating model which is static and does not evolve.

Some of the choices made in the past by Thomas Cook answer this question.

Focusing on launch: Emphasis needs to be placed on supporting the critical post-launch adoption phase when all program benefits should be realized. But disproportionate focus ends up being placed on the development and delivery stages. Program resources and knowledge dissipate rapidly when post-launch testing is complete.

Thomas Cook didn't even get to this point.

Lessons learned for companies embarking on the journey

Stronger companies than Thomas Cook have tried and failed. GE ran into severe problems trying to shift via a huge digital transformation effort to a 'digital industrial company'. In 2014, Nike turned back the volume on its digital program. Even companies such as Lego, Burberry P&G, or Ford and the BBC struggled heavily when trying to adopt a life-changing digital initiative.

Because of the nature of my job, I have talked to many CxOs about Digital Transformation and read quite some interesting articles, of which I'd like to share some viewpoints.

In this article on Raconteur: "The straightforward guide to digital transformation", Francesca Cassidy lists a couple of interesting points we see returning at companies successful in adopting a Digital Transformation strategy. In general, the below are valuable rules but can differ from organization to organization. Most companies can benefit from an incremental change, but some companies are ready and truly can steer and digest rapid change. But below are general rules for a successful transformation:

1. Go Slow to Go Fast: it's more than technology, it's as well about learning from each other, understanding how you are a part of the process, where you fit in. How changes in business processes can have an impact and are a vital part of the transformation as well.
2. User-friendly Technology: it is not about technology, but technology is the enabler, sitting at the heart of every digital transformation initiative. This impacts employees, people tremendously and you need to consider how you can soften that impact by adopting the most user-friendly tools.
3. Shrink the change, change the path. Out of the book "Switch" by Chip and Dan Heath - this translates in making small incremental steps that in the end sum up to a larger transformation, rather than making a drastic sudden dramatical change at once.
4. Articulate the "WHY". Transparency is important in transformation. In the end, you need to lead people in a certain direction. And in that context (think of the Simon Sinek book 'Start with Why') - leaders need to have a clear set of Why - How - What. It's applicable as well in this context.
5. Focus on the next best actions. As stated beautifully with an example in the Raconteur article: "When the Maltese national airline, Air Malta, underwent digital transformation, they detailed a five-year plan. Years one and two prioritized revenue-generating activities, year three efficiency and optimization, year four innovation, and year five will be spent consolidating all new tech and platforms. Along the way, old initiatives have been revisited, reworked, or jettisoned, as required. Identify a path to follow, but be prepared for deviations along the way." It's not a straight path but a winding road...

‘Doing’ Digital or ‘Being’ Digital

Many organizations that set out on a digital journey often step into a series of disconnected technology projects. But real maturity is much more than this: it requires an integrated digital strategy encompassing business models, customer experiences, and talent.

Focusing too much on the technology-focused approach towards digital transformation has a result that outcomes are minimal. Repeating this many times to increase the result, ends up in a circle of "digital transformation stuff": disconnected digital initiatives, drained capabilities, isolated technologies. The true power of digital transformation typically lies in the business advantages it can deliver, and that means “being” truly digital, with deliberate connections between all digital efforts and core business operations.

Many ways to a successful Digital Transformation (Deloitte)

There are many ways to approach this shift based on the organization’s culture, market position, and current challenges. Many successful businesses arrive at “being” digital by moving iteratively through a set of cascading considerations:

Ambitions and value: Evaluate the organization’s foundations and be very clear about its business objectives—not only for digital but for the business as a whole. These can include any overriding purpose as well as both financial and nonfinancial objectives.

Existing operations: Assess the organization’s value proposition, test its sources of defensible competitive advantage, and probe its profit models. Understand how it can provide a differentiated experience to customers, employees, and partners—both digitally and nondigitally.

Human capital: It’s important not to overlook human capital, including any changes needed to the enterprise’s work and workforce.

Business model: Consider what kind of business model will be needed to execute on the company’s differentiated digital strategy, including new business processes and work practices.

Communication: It may seem obvious, but companies can trip at the finish line by forgetting to tell the market that they are a 'new' organization.

Three Paths to Transformation seen at customers

No two companies are the same, so it’s important to develop a strategy for transformation that takes into account the unique aspects of the organization, including its industry, culture, and history. The following examples illustrate three distinctly different transformation paths:

Total, rapid transformation. A 100-plus-year-old financial services company that offered savings plans and wealth management products to employees of large companies had a struggling brand. Its ambition was to become the “one-stop-shop” for consumer retirement needs. Company leaders set the vision and expectation for collaboration across business units, bringing together multiple functions to develop new products and services. Focusing on the connection between health and wealth, the company set a goal of rebranding as a wellness company and identified digital health opportunities that could make retirement more fulfilling for its clients. The company then rapidly iterated a total transformation, becoming a cross-industry health and wealth company that meets and responds to customer needs in completely new ways.

Smaller scope, rapid release. A large retailer knew it needed to differentiate its customer experience to win in the marketplace. Toward that end, it identified an opportunity that could help its associates deliver better service to customers: an app that allowed for pre-orders so customers wouldn’t have to stand in line at the store. The company started by putting a minimum viable product—the app—into a few stores, eventually scaling to all of them over the course of a year. The app’s success eventually affected other customer-facing services through integration and added functionality, transforming the company from the employee experience outwards.

Larger scope, slower release. A state agency knew there was significant opportunity to serve constituents better with a more digital organization, but it didn’t want to put out a product before it was well tested. Instead of relying on the traditional waterfall approach for product development, leaders focused on making internal changes and developing digital capabilities and offerings in-house, with agile sprints over the course of the year. The agency continued to improve its offering and change its mindset behind the scenes, testing its product well before putting it into the market. After a year, it was set to reveal a fully transformed organization (and thoroughly tested product) to the people it served.

Advice

Digital technologies have a pervasive influence on all areas of a corporation, from the impact on customer experience to enhanced productivity in operations and improvement in the way people collaborate within an organization.  At Deloitte, we can help.        

Our consultants help you define and deliver winning strategies by harnessing the power of the new digital economy. It's all about a clear vision of the "digital future" of your business and selecting the right tools and technologies. In case you are embarking on, or already in your Digital Transformation journey - it is always a good idea to step out for a helicopter view or ask for a review by an external partner.