That’s a big ambition given that e-commerce revenues in 2016 stood at €1 billion, but the point was made that this was a marathon, not a sprint.
Flash forward to Dreamforce 2018 and the sporting analogies are hard-wired into the adidas corporate mindset, as Sebastian Drews, VP for Digital IT at the firm explains:
The core belief that we have is that we need to behave in business like in sport. We need to think like an athlete. That means two things. Number one - we set ourselves clear ambitions and clear goals; second, we have a great training plan and we execute against that.
Our belief is that through sports we have the power to change lives and our vision is to be the best sports company in the world. We've executed our strategy called Create the New. with the clear focus on creating brand desire. Digital plays a key role in executing that strategy as one of the accelerators for us. It actually lets us get close again to the consumers.
Drews makes the point that when adidas was founded in the late 1940s, its creator Adi Dassler was able to get direct feedback from customers simply by sitting on the sidelines of sporting events. Today, with adidas as a global concern, that’s clearly not feasible:
We have 40 different countries in which we operate. We have 500 million unique visitors a year. We have more than a billion visits on our sites. Technology-wise, it's complex as well. I operate a stack of probably a hundred applications.
The only chance [to get that feedback] is through data and digital technology. That’s how we can build more direct relationships with consumers and get closer again and understand where it will be headed. That's the ambition of our ‘athlete’s training’. But in the end, it’s all about executing and being relentless about it.
Execution is an idea to which Drew returns time-and-again and it’s clear that this has become a core tenet within adidas:
What’s changed in our company over the past year is that we’ve been taking huge pride in executing work flawlessly and with perfection…It’s how you play day-by-day on the pitch or on the court and how you try to get better every day. In the IT function we’ve clearly articulated that only if we get the basics right and only if we’re able to future-proof our core, then we have the capacity and the credibility to invest and build out the digital treatment.
The interesting thing is that operational excellence for us is no longer only a hygiene factor, but it's supposed to be differentiating factor in the competition. We've just agreed in the digital business that operational excellence is the number one initiative which we will drive through the whole digital organization. Why do we do that? Our ambition is to build a premium connected personal shopping experience. If you think about that, premium means flawless. If we don't get the basics right and make sure our most important store, adidas.com, operates flawlessly, we will not be successful.
Flawless is a big ask, of course, and demands a corporate culture and mindset that is comfortable with a lofty ambition. This is taking shape, attests Drews, but it does require a concerted effort:
The approach we take is that we want to make sure that everybody feels an accountability for driving operational excellence in our organization. In the end, it's about creating that culture of ownership, of recognizing the small things and addressing them. But what we also do is we invest systematically into the processes and technology. So I mean a lot of the talks we have with Salesforce are around how do we make the platform more resilient, around automation, how do we drive global scale of everything we do? It's really coming back to the basics and making sure we can operate the business in a seamless way.
It comes back to saying that driving excellence is not a project you do and then you're done at some point. It basically means operational excellence needs to become a habit and it's everybody's responsibility to live it on a day-to-day basis. And the mindset behind that is exactly [that of] being an athlete on the court. We strive to perfection and try to get better day-by-day. You have good days and you have bad days, don’t get me wrong, it's not a whole lot of shiny perfect all the time. But for us that mindset of constant improvement, of pushing the boundaries, pushing ourselves to further action, that’s actually what makes the difference. We clearly expect that everybody who works on our team has a growth mindset.
It’s also important to listen internally as well as to customers externally. Drews says that adidas regards internal feedback as a key learning opportunity and actively sets out to make gathering such feedback as easy as possible:
We run regular code review challenges internally within our engineering workforce and we do that in a really playful way, to really encourage people to rip the code apart that others have been writing. We have a little competition going. We have a lot of technical experts who love this challenge. Sometimes before we launch a major new experience, we’ll do an internal hackathon and just have a go and really try to break it. That’s one very practicaly example.
Another thing we have going at the moment is that we are working to set up a button on the shop side in our labs for internal employees only, so that you can report any issue or strange thing that you follow, any idea for improvement…It’s a bit like never letting go. If you think about how athletes train, that’s exactly what they want. They do video taping, they get direct feedback from the coaches, from the audience and that’s what we need to establish in the business.
The sporting analogy extends also to how adidas works with its partner ecosystem. Drews notes:
Every athlete has a huge support structure around them. If you look at the top players in basketball or tennis, they have coaches, mental coaches, physical coaches and nutrition coaches. That's how we see our partners actually. Our partners provide us with insights ,with data. They celebrate with us when things go right. They help us get back up when we get injured. Sometimes they challenge us when things don’t go right…I don't want to talk about vendors and suppliers, I want to talk about partners, I think in the digital economy the boundaries of corporations are being challenged and stretched anyway.
He illustrates his point by referencing adidas’s work with Salesforce:
With Salesforce, we actually do two things. So number one, after we've been to Dreamforce, we sit down and talk about our product roadmaps and the investments we drive. I'm really focused on the core platform capabilities. We work on things like order throughput in Commerce Cloud and we have very heated, animated discussions about that. That’s basically the systemic investments, into the processes, into the technology, into the DevOps capabilities that we require to operate at scale.
But even more important, it's about building one team and getting everybody wearing the same jersey. So when we launched [new sneakers], we operate [around] them 48 to 72 hours non-stop. We have people from Salesforce in our office. Everybody has a good time together with the same objective. There is no us and them There is no winner and losing team. They're the only winners and the winning team. So far that works pretty nicely.
At the end of the day, it’s all about winning and delivering results, he adds:
We can have the best intentions, but in the end it's all about the results created for the consumers in the market. We've been driving massive improvements in the stability of the platforms. We've cut down the production critical incidents by 70% over the last 18 months, just through automating test automation, doing better QA, checking in before we deploy stuff. We’ve done that while we’ve dramatically increased the speed in which we deploy changes, so that we are deploying parts of our stack multiple times a day. That’s a massive improvement that has changed my relationship to my business partners quite substantially.
We’ve dramatically improved conversion. Mobile conversion is one of the core KPIs to measure the success of our digital business. Last year we’ve grown mobile conversion by 35%. That's come from just optimizing the site, driving site improvements. Mobile convergence is just a great lever to drive a more profitable business. We’re also investing into increasing customer lifetime value, into making consumers come back and repeatedly buy from us. We've made some major shifts there as well in the last years. From my view given not done, but I can definitely see that all the investments we drive and the focus on leadership really pays off in business terms.
While the race to €4 billion goes on, Drews can pick out a number of learnings that could help other corporations to get over the hurdles of similar transformation programs:
It's important when you start driving operational excellence that you tie it directly back into business results and into KPIs that make sense. So for instance, when we talk about inventory management, use a KPI that says, ‘How many orders for consumers do we have to cancel due to outdated inventory in boxes?’. That number is something that everybody can relate to, right? Because in the end I'm a consumer and if my order doesn't go through, I'm not happy.
My second tip is to partner up. In a global matrix organization, there’s no way I can be to be in control of all the work that has to happen to address a specific issue or opportunity. So my job actually is to organize the horizontal loyalty and support in the organization, just through providing leadership and focus and getting everybody rallied against the common objective of what we want to achieve. And that doesn't stop in the company, it extends to partners like Salesforce.
The last thing is that you can have the best intentions and the best slides, but in the end it’s about what happens on the pitch. It's the execution…we prioritize ruthlessly for value, but also we execute in a very relentless way…focusing on execution is the little things. There's no golden bullet. It's really how willing, how decisive are you and how much do you want to be successful? That's what makes the difference.
The adidas story was one of the most interesting customer exemplars at last year’s Dreamforce. That hasn’t changed this year. With clear targets and expectations in the public domain, I’m keen to see how far round the track the company is by the time we get to Dreamforce 2019.