Digital transformation involves more than just updating technology and processes; it also involves revenue and shareholders. Many companies are hesitant to invest in digital transformation without knowing if the investment will pay off. However, when done strategically, digital transformation can improve stock prices and revenue in the long run. These seven major companies show that changes might not occur overnight, but investing in digital transformation can make a large financial impact over time.
7 Years At Best Buy
Seven years ago, most people thought Best Buy was dead. Even people within the company didn’t believe it could survive against Amazon. But a new CEO and a fresh digital perspective transformed the electronics store from a place to buy CDs to a digital leader in technology. Instead of just selling products, the brand aims to enrich people’s lives with technology.
To make that happen, Best Buy made major efforts to improve its delivery times. It introduced a price matching program and switched its focus to advising customers, not just selling to them. Best Buy employees offer in-home consultations on how customers can best use their devices, and the Geek Squad will now fix anything in a customer’s home for a flat annual fee.
Best Buy also transitioned from predominantly mail marketing to an almost entirely digital strategy. It uses data to create customer profiles to provide customized recommendations and assistance.
Best Buy’s digital transformation hasn’t been without hiccups, but the results are starting to show. Best Buy started 2012 with a stock price of $23.70. As of July 2019, it sells for around $74. Early growth was rather slow, but prices have been steadily increasing over the last three years. Revenue actually decreased over that same timeframe, but has increased steadily in the last three years, jumping from around $40 billion late 2017 to its current $43 billion.
8 Years At Target
Target outsourced its web presence which they saw as ancillary in 2004, to Amazon. But in 2011 Target saw the writing on the wall and decided to take back its digital presence from Amazon and focus on it as a main piece of business. Target has been investing in its stores to create a new, remodeled design that blurs the line between e-commerce and physical stores. More than 400 stores have been remodeled and equipped with new technology in the last two years and have introduced online ordering and in-store pickup and curbside grocery pickup services. Many new aspects of the store follow the D2C model by selling exclusive items at pop-ups from popular brands. Target has also made strides with a consistently engaging social media presence that allows customers to discover new products and even buy them directly through social media.
The ongoing effort to build a more holistic digital strategy allows for deeper customization. And it’s clearly paying off. Target has been seeing steady growth since its lowest point in 2006. Target stocks started 2017 around $73 per share and dropped down to around $53 when the initiatives ramped in the middle of the year, but now currently trade around $88, with growth holding steady in that period. Over the last two years, Target’s revenue has increased from around $70 billion to $76 billion. And it’s not done yet: Target plans to remodel another 600 stores by 2020, at a cost of $7 billion.
5 Years At Microsoft
Microsoft has long been known for its top products, Windows and Office suite. But lagging stock prices and increased competition from companies like Apple and Amazon led the company to re-think its strategy and create a more forward-focused cloud business.
When CEO Satya Nadella took over in 2014, the company began a shift towards its cloud networking systems. It moved the focus away from traditional software to a more fluid cloud system for both personal and enterprise use. Instead of shying away from partnerships like it had in the past, Microsoft changed course to build relationships with other software and technology companies. Public view also changed, as Microsoft went from being seen as an outdated or stagnant company to a forward-thinking cloud solution. As it proves itself with more deals and growth, Microsoft’s star continues to rise.
In early 2014, right before Microsoft’s transformation began, stocks were selling around $38 per share. Today, they’re worth around $136. Over that same period, revenue increased from $93.5 billion to $122 billion In 2019, Microsoft became just the third company to get a $1 trillion market cap, notably before its competitor Google. That accomplishment wasn’t even fathomable just a few years ago.
2 Years At Nike
Although a staple in shoes and athletic clothing, Nike started looking sluggish and out-dated a few years ago. The company switched its mindset and underwent an ongoing digital transformation to reinvent its brand and supply chain.
Instead of going through middlemen, Nike improved its connection with customers through membership opportunities, stronger digital marketing and powerful data analytics. Instead of selling through other vendors, Nike started selling more directly to customers and partnered with Amazon for an updated e-commerce strategy. An end-to-end focus on consumer data better allows Nike to connect with customers and recommend the right products. It also opened concept stores and improved its online and app experience.
The improved digital focus gives Nike a faster product development cycle, which allows it to get new products to market quickly, respond to and set trends and control how many items are produced. A large part of Nike’s brand is the scarcity of some of its shoes and the coolness factor that creates.
Nike’s digital transformation is ongoing as it pushes for innovative ways to connect with customers and get a leg up on the competition. At the beginning of 2017, its stock price was $52; it’s now up to nearly $88. In that same time, revenue increased from $33.5 billion to $39.1 billion.