How one Australian conglomerate is embracing digital transformation
Digital transformation is more than just a catchphrase, it is a global movement that is improving businesses and customer experiences worldwide.
Although embarking on a digital transformation can be daunting and requires investment, many companies worlwide are starting that journey because they know it will pay off in the future.
We’ve already looked at how Blockbuster missed their big opportunity to digitally transform their business, and we all know how that ended for them.
The inverse of this is, of course, Netflix, which is now a $122 billion-dollar company. As noted by customer experience expert Blake Morgan, when done strategically, digital transformation can improve stock prices and revenue in the long run. Consider the chart below:
However, these are all American-headquartered companies. How about in Australia? Well, one Australian conglomerate which has recently begun to embrace digital transformation is Wesfarmers (ASX:WES).
In June, Wesfarmers held its Strategy Briefing Day, outlining the key initiatives it had undertaken in FY19 and its plans for the years ahead.
‘Data & digital’ was one of the key areas of focus for the group, which said it will continue to invest in its e-commerce and efficiency capabilities as well as improving back-end systems and processes to support future growth.
More specifically, Wesfarmers last year invested in the creation of an Advanced Analytics Center which uses purchasing and other customer data to calculate and calibrate the value of customer offers and loyalty programmes.
“The advanced analytics centre will assist in utilising data science and best-practice analytics to enhance our decision making, develop new business opportunities and help solve problems across the group in a range of areas including customer insights, pricing, ranging, salesforce effectiveness and supply chain management,” Wesfarmers Managing Director Rob Scott said.
Over the past five years, Wesfarmers’ Bunnings hardware store chain has been the main target of growth expenditure, according to the FY19 Strategy Briefing Day.
Source: Wesfarmers Strategy Briefing Day
This is in part due to Bunning’s disastrous entry (and exit) from the UK market but also involves the Wesfarmer’s ongoing investments in digital transformation.
When you think about hardware stores, digital technology is probably the last thing that comes to mind.
However, in FY20 Bunnings announced that would be outlaying $30 million on upgrading its online sales platform to enable click-and-collect.
Following an initial pilot in Tasmania (Bunnings is not rushing this after the UK debacle), click-and-collect will be rolled out in Victoria and then the rest of Australia.
As part of the Bunnings digital transformation initiative, Wesfarmers says it is investing in “specialised skill sets” to accelerate its data and analytics capabilities.
Broadly speaking, these capabilities will span four use cases:
- Safety -identifying contributing factors to safety incidents,
- Localisation- in-store product ranges are tailored to meet local conditions
- Inventory optimisation- to improve in-stock position and increase productivity
- Personalisation- for personalised marketing and customer interactions
Source: Wesfarmers Strategy Briefing Day
Wesfarmers is also accelerating its digital transformation efforts across other parts of the group.
Blackwoods, which is the largest provider of industrial and safety supplies in Australia and also part of the group, is currently in the process of replacing its 30-year-old Focus COBOL-based system with a new Microsoft Dynamics ERP.
However, according to the latest reports, this initiative has been facing some roadblocks, as the team battles to migrate a generation’s worth of legacy code.
“The performance of the Industrial and Safety business was disappointing, reflecting the impact on Blackwoods’ earnings from ongoing investment in customer service and the enterprise resource planning (ERP) system,” Scott said in Wesfarmers FY19 results briefing in August.
The struggle to implement the new ERP system highlights how digital transformations may not always go smoothly.
However, if the brains behind the world’s – and Australia’s- biggest companies think it is worth it, you should definitely be looking at how to digitise aspects of your business.
As for Wesfarmers share price, after a rough end to 2018, this year has seen it steadily climb, rising approximately 23% year to date. While that isn’t as dramatic as some of the gains seen in the American companies mentioned earlier, it is certainly still an impressive increase.
Source: Google Finance
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