Why Old-School Brands Like Gap Need to Learn New Tricks to Survive in the Digital Age

On the third floor of Gap Inc. in San Francisco, near the western terminus of the Bay Bridge, a bank of 14 big-screen monitors displays web visits, order volumes, sales funnels and other real-time analytics to a constantly rotating team of employees. This is Mission Control, the beating heart of Gap's customer experience group. Here, producers, front-end developers, UX designers, data scientists and employees with Swiss Army knife business skills from across all six Gap brands gather to define and refine the customer journey. Depending on the time of year, between 15 and 50 employees are at Mission Control, helping the 49-year-old company operate at internet speeds, says Noam Paransky, svp of digital at Gap Inc. Paransky began assembling the team last June, giving it time to ramp up for the peak holiday-shopping season. [kickout id="1" label="marriott"] "We're focused on getting into the guts of the experience, doing a lot of optimization and deep user research, and continuing to drive our business forward working hand in hand with our tech operation center," he says. "By having an interdisciplinary team physically located and working together, and then connecting in with the rest of our broader organization and centers of excellence, we're able to have a pulse on the business in a way that we didn't have before." Mission Control is just one sign the $15.5 billion apparel retailer is taking transformation seriously. Over the last six months, Gap has rolled out subscription box services for babyGap and Old Navy customers, introduced curated product recommendations and is testing low-barrier loyalty programs customers can sign up for via SMS. That's because old-school brands like Gap know that new tools and terabytes of data aren't enough; to survive in this brave new digital jungle, they need to reinvent how they do business. Digital now, transformation later When it comes to digital transformation, most brands have the digital side down. They're using Adobe or Salesforce marketing cloud, Sprout or Sprinklr for social engagement, RedPoint Global or Segment to manage customer data, and so on. It's the transformation that's the hard part. Because it's not just about having the right tools, it's about having the right kind of organization, operating model, talent and mindset, says Jason Heller, partner and global lead for digital marketing operations and technology at McKinsey & Co. "Most companies are technology rich but insight and execution poor," he says. "They have the technology, they just aren't using it properly." For brands, digital transformation usually centers on optimizing the customer experience. Smart organizations are creating cross-functional, co-located teams (or pods) that can generate ideas, test and launch them in less time than it takes most organizations to set up an initial planning meeting, says Heller. "You can have a pod that comes up with an idea on Monday, executes it on Wednesday, and has enough data by the following Monday to make a call and roll out a new experience," he says. "When companies put this kind of team together and take all the business-as-usual responsibilities off their plate, 100 percent of the time it leads to a broader agile marketing transformation." According to Gartner, by 2020 more than one in five marketers will restructure their organizations to focus on the customer experience. "Modern marketing organizations are starting to operate more like agencies, where talent is dynamically assigned to projects," says Christopher Ross, research director at Gartner's digital marketing group. "It's not based on where a person sits inside the organization but on the talent they need for a particular project. The common denominator is a much more agile way of working." Font farewells Few companies have gone through a more dramatic digital shift than Monotype. The Woburn, Mass.-based firm started selling hot lead typesetting machines to publishers in 1887. After selling off the typesetting business, Monotype then went on to become a font-licensing firm, owning the intellectual property behind classic typefaces like Helvetica and Times New Roman. Three years ago the company acquired digital sticker startup Swyft Media; a year later it bought Olapic, which specializes in user-generated branded visual content. Together, the acquisitions allow Monotype to bring branded images to mobile messaging apps and collect data that can be used to target ads. [kickout id="2" label="dominos"] "The next evolution of the written word is stickers and emoji," says Monotype CMO Brett Zucker. "We've morphed from a pure IP-licensing company to a visual brand representation and software company." But the shift from font-centric publishing to a model that also includes image-based advertising required a sea change in how Monotype operated. "The first thing we had to do was change our mentality," says Zucker. "That cultural shift took some new people and changes in organizational structure. It took some changes in our core values as a company, and the first one was to be bold and curious. We made it OK to take risks." As part of the transformation, Monotype dissolved the separate go-to-marketing units of Swyft and Olapic and brought them together under one roof, which meant mixing Monotype's longtime employees with their younger counterparts at the two startups. "We've changed the makeup of the company," he says. "Some people didn't want to do that, so they left. But nearly everyone else has responded incredibly well. We knew we had to change. We know what happens to companies when they stand still." The talent gap Brian Solis, principal analyst for Altimeter, says every organization looking to transform itself must go through six stages. It starts with business as usual—companies that look at digital as just another line item—then moves into stage two, where orgs have begun to test and learn, but still operate in silos and remain snug inside their own comfort zones. Over time, organizations become systematic in their efforts, get buy-in from top executives and begin to make long-term investments that eventually result in an organization driven by innovation. But today, most companies have yet to get past stage two or three, he says. [kickout id="3" label="BEAR NAKED"] "Digital transformation is actually an outside-in process that's being driven by what I call 'Digital Darwinism,'" Solis says. "Customers are evolving, people are evolving, but business processes, models and mindsets are not keeping up. They've acquired the technology, but haven't really looked at what's different about behaviors, expectations and preferences, or how they can use it to create new value for customers and employees." But even highly advanced companies are still struggling to spread transformative models and mindsets across the entire company, says Gartner's Ross. "There might be pockets of excellence where a particular group or division is running really well," he says, "but it's hard to do these things at scale consistently across the organization." One reason is the gap between the skills organizations need and those they currently possess. For example, in Gartner's November 2017 Marketing Organization Capabilities Survey, roughly two-thirds identified data literacy and the ability to apply marketing technology as highly important, but only about half say they have those skills in-house. They're looking for what Ross calls "Fat T Marketers"—employees with both broad knowledge and deep expertise in multiple topics, like data analytics or brand messaging. Only about one in four marketers in Gartner's survey consider themselves Fat Ts. But smart organizations that don't have them are growing their own. "Companies that are doing well are embracing this challenge," Ross says. "They're prioritizing the development of their people, through both formal training and apprenticeships. They're not just putting people in an organization and hoping that somehow good things happen." The never-ending customer journey Ultimately, digital transformation is really business transformation, says Glen Hartman, head of Accenture Interactive for North America. [kickout id="4" label="CARNIVAL"] "When people say, 'Tell me about digital transformation,' they're really asking, 'How do I reverse engineer my operations and organization models and skill sets to deliver new experiences?'" he says. "And that's really about putting the customer as the center of what they do." A brand is really a set of promises, Hartman explains; a brand keeps its promises by delivering the kinds of experience the customer expects. For example, Volvo promises safety; BMW promises performance. Increasingly, though, consumers expect brands to not know only who they are and what they like, but also to understand the context of each moment and adjust their promises accordingly—what Hartman terms the "Big E experience," where "E" stands for empathy. Most companies are a still long way from the Big E, but they're slowly getting there. Five years ago, less than 5 percent of organizations really understood the changes required to navigate the new customer-centric landscape, says Hartman. Now he estimates that number is closer to 20 percent. "But that still leaves 80 percent who are still moving across the continuum, trying to defend their old business, or just starting to move into personalization," he says. "How do you keep your core business alive while you try to evolve? It's not really digital transformation, it's really business transformation and customer-centered thinking." Gap's Paransky acknowledges that once you're on the path to transformation, there's no getting off. "It's hard to measure where you're at when the process of evolving in this landscape is infinite," he says. "We're a ways along in understanding our ultimate objective, but there's always more work to do."