Inside Levi’s Digital Transformation – Harvard Business Review
For more than a decade, the term “digital transformation” has been nearly ubiquitous across industries. While it’s taken on different meanings depending on the organization or context, one thing remains constant: it’s not stopping or slowing down anytime soon. The global pandemic made clear that digital’s role in organizations is more important than ever. According to IDC, global spending on digital transformation is expected to reach a staggering $6.8 trillion by 2023.
But not all digital transformations are created equal. Take Levi Strauss & Co. (LS&Co.), for example, where I’m executive vice president and chief financial officer. The iconic retail and apparel company’s more than 168 years of deeply-rooted habits and traditions mean that it faces a particular set of challenges, and that addressing them meant looking for solutions that made sense in our specific context. To emerge from the pandemic stronger as a company, we knew we had to prioritize our digital investments and rethink our normal ways of working. This required new shared alignment across the executive team and new cultural agility across the organization.
A Cultural Transformation
Many have noted the critical role that culture plays in enabling technology projects to succeed. For example, a 2019 survey from the Economist Intelligence Unit identified organizational culture as a key challenge in encouraging widespread technology adoption inside organizations. Our company was no different.
Historically, innovations within LS&Co. would take months and even years to launch. But in today’s fast-paced world, waiting for perfection is a recipe for getting left in the dust. Even before the beginning of the pandemic, we’d been on a long journey to transform our business into a digital-first organization that behaves like a tech company as much as a retail and apparel company. It’s easy to take the phrase “digital first” at face value and to assume that this centers around the commercial technology implementation: upgrading our digital infrastructure, enhancing our mobile app, adding new online capabilities, and so on. And of course, that is part of this journey.
But there is so much more to becoming digital first than enabling transactions and speeding up the supply chain. Technology must extend deep into our ways of working for the organization to realize all the benefits it offers. As an apparel company, we were rooted in a “perfectionist” mindset. Typically, we would take an idea, plan for six months, create the “perfect/best” solution, and then continue to iterate for another six months or more to get it right before bringing it to market. However, a tech-first mindset is anchored around agile ways of working — a “perfect” solution is an evolution. Perfection can be the enemy of quickly connecting with our consumers.
The pivot to remote work in early 2020 underscored this lesson. Not being in an office required employees to adopt an entirely new way of thinking and relating to the company — and to one another. But what we found was a culture that willingly embraced a wide range of technical tools in the spirit of business — and culture — continuity.
Like most companies, we were in a sprint to develop and rollout new capabilities, all from a work-from-home setting. Tech-enabled options like “Buy Online, Pickup In Store,” appointment shopping, curbside pickup, “Ship from Store,” and so on, needed to be deployed in the matter of weeks so product didn’t just sit on the shelves. Even further, we needed to react to new kinds of consumer demand while staying competitive in the market. Rather than slash prices and roll out markdowns broadly like many of our competitors, we enlisted AI to help us preserve margins by recommending smarter discounts and promotions — a first for the company. Technology became even more vital to running our business.
Going through this experience, we discovered that the changes digital transformation spurred in our company culture are just as much of a benefit as the new technical capacities it enabled. Digital transformations are more than turning on new solutions or digitizing platforms and workstreams. They’re about transforming your workforce to think in an agile and digital-first mindset, and encourage the creation and adoption of technology that is new for the team and sometimes new for the industry overall.
Here are four key insights leaders should keep in mind as they continue along their own technology and organizational journeys:
1. Don’t Let the Perfect Be the Enemy of the Good
When going through a major transition, it’s important to constantly remind employees that failure is OK. In fact, it is critical to success, so long as you learn from those lessons to constantly improve. Your employees are only human after all. Don’t let the perfect be the enemy of the good.
While this mindset is popular among digital native and newly emerged businesses, it’s still rarely practiced among legacy organizations. LS&Co. has 168 years of traditions and habits around how work gets done, which made shifting to a “fail fast” mindset a herculean task. At the start of our journey, I knew we had to rethink our transactional ways of building innovation and approach it as an iterative process.
Our “Ship from Store” offering is a prime example. While always on our digital roadmap, the pandemic accelerated our efforts to bring this offering, among others, to market sooner. We didn’t have the luxury of time to perfect the technology or application. Instead, we quickly launched and have continued to adjust as we learn about what’s working and what’s not.
Adding a new capability like this one requires more than just installing a new button at checkout. This feature increased the workload for store managers and stylists, and it depended on real-time inventory access – aspects that we didn’t necessarily have ready to instantly integrate and were working on simultaneously. We knew this was not something we could or should immediately rollout on a large scale. It needed to be an evolution where we could test in select stores, collect feedback from both employees and customers, and improve the technology while adding more stores along the way. While this iterative approach is second nature to technology companies, for us it represented a shift in our development approach and required our teams to get comfortable changing and improving the solution as we scaled it across the company.
The encouragement and support of leadership to enable this cultural agility and build an environment where ‘good’ is okay is critical to our journey. Our IT team, led by CIO Chris Clark, has been instrumental in leading this shift, and he constantly reminds our team that this is a journey.
2. Leapfrog Over the Competition
When feeling “behind,” it’s easy to let panic set in. This is when a lot of organizations go wrong — they focus on building new tools to catch up to the competition versus building new tools to get ahead. The first question I always ask our employees is, “what is our competition not doing?” and use that as a starting point.
For example, as the retail industry grapples with how to appeal to the Gen Z buyer, we’ve taken a close look at their shopping behavior and preferences. From being among the first retailers to accept PayPal and Venmo in stores to engaging on Instagram, TikTok, and Snap in new and creative ways, we’ve made a concerted effort to be on the platforms Gen Z prefer while staying ahead of our competition.
Since these offerings are digital in nature, the journey is just as beneficial as the outcome. While it’s great to sell more product, the discovery process gives us an opportunity to deepen our connections with our customers and followers, and to better understand their behaviors. Sales are not always a leading indicator of success. Instead, we should ask our teams, “what did you learn?” “Are you done learning?” And, “are your results conclusive?” These questions reshape how the teams measure success and can teach them where to go next.
3. Everyone Should be Data-Driven
One of the main benefits of going digital is that organizations can now collect — with consumer consent and appropriate governance, of course — enormous amounts of data that were previously not possible, enabling businesses to understand the consumer in new and novel ways. Data is key, but never lose sight of the human element.
To do this, internal teams need ways to receive and digest the information being collected, or it will do no good. Moreover, companies should provide the means and incentives for each function to think critically about what to do with all this new information. What can be done to enable even deeper consumer connections? How can the organization reimagine itself to become more relevant? These are big questions, and they can be answered only when real humans apply their unique lenses to the wide arrays of data that are now available.
To that end, instead of hiring outside tech talent to fuel our digital transformation, we launched a Machine Learning Bootcamp in 2021 to upskill our employees. Employees from across the globe and from any part of our business (including retail stores, distribution centers, and corporate functions like finance, HR, marketing, and so on) were invited to apply to participate in an immersive eight-week, paid, full-time training where they learned coding, Python programming language, statistics, and more. Some graduates of the program have the option of joining the AI & Strategy team led by my colleague Dr. Katia Wash, while most of the employees return to their previous role to put their learnings into practice.
In our inaugural year, we trained more than 100 employees from more than 20 locations spanning North America, Europe, and Asia Pacific. The program underscores our belief in our people and their power to drive change. When given the opportunity, they can unlock new ways of leveraging AI and machine learning to reimagine work and processes across the company.
4. Allow Time for Tech Savviness to Grow
For many teams, adjusting to new ways of working and understanding new is familiar territory; for others it can be a huge paradigm shift. Recognize that people are being asked to make a behavior change and approach it as a process rather than forcing change overnight.
As part of our digital transformation journey, we are upgrading our enterprise resource planning to a standardized on-the-cloud solution that is well integrated with all systems in the organization. The benefits of the upgrade mean we can make better data-driven decisions with access to real-time data. To realize the full potential of the data, employees must embrace new tools and develop data savviness. We don’t expect that to happen overnight, given employees are comfortable using systems that have worked for them for years. We realize with training and a clear picture of how the systems simplify and supercharge their work flows we’re creating an innovative and responsive culture around data savviness.
One example of how our culture has evolved to embrace a new technology initiative is the use of Robotic Process Automation (RPA). After 4 years, we now have our own, internal RPA Center of Excellence (COE) team seeking out ways to streamline processes and create bots to automate tedious, manual work. It took time to test, educate and demonstrate the benefits of RPA across the organization, and it’s now gaining immense traction. It’s exciting to see our organization embrace RPA with open arms, but it’s been a long road of continuous education and encouragement from the RPA COE team. We had to demystify concerns around “automation” and explain the immense value it can bring.
. . .
Success doesn’t always look like what you initially thought. I’ve seen this throughout my life both professionally and personally, and this is especially true in business. The place we end up is different from what we set out to be, and often, the journey becomes even more valuable than the actual outcome.
We’ve seen this play out a lot over the last year-and-a-half. Covid uprooted industries across the board, and for retail, created an even larger divide between the leaders and laggards. Every company fast-tracked their digital roadmaps to respond to the shifts of the pandemic, keep their business afloat, and stay connected to their consumer. But this wouldn’t have been possible, especially for us, if we hadn’t shifted our ways of thinking.
As the pandemic continues to sweep our world and impact our industry, it’s time to evaluate our digital strategies and think about what success looks like for both our employees and our companies.
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