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The Digital Savvy CEO

Last year, to the surprise of many observers, Spain’s second-largest bank BBVA promoted its head of digital banking Carlos Torres Vila to the position of Chief Executive Officer of the global financial group. Despite his lack of experience in retail banking, Torres Vila was tapped to lead the Madrid-based bank—one of the world’s 50 biggest—in a move that signalled the company’s intent on making digital transformation a top strategic priority.

As more and more industries feel the upheaval of new digital disruptors impacting their traditional businesses, organisations in all sectors today are increasingly faced with an existential challenge: change or be changed.

At a time when digital upstarts are doing to the banking industry what tech-minded challengers have already done to other traditional sectors such as music and film, BBVA is fighting back by reinventing itself—both from within the organisation by transforming its operations, and from outside by building a portfolio of digital businesses that are themselves industry disruptors.

Speaking in April at the inaugural Money20/20 Europe conference—billed as the continent’s most important fintech event—Torres Vila outlined in his keynote address the challenges of competing with more-nimble fintech providers while also admitting to the need for collaboration with these digital competitors. “We are seeing now that, even after so many years, all the new companies are doing the stuff that we do in a better way with a superior value proposition and lower cost because you are leveraging new technology,” stated Torres Vila. “Customers are speaking with their feet. They are moving to new channels…They are clearly unsatisfied.”

As more and more industries feel the upheaval of new digital disruptors impacting their traditional businesses, organisations in all sectors today are increasingly faced with an existential challenge: change or be changed. With the likes of Uber, Bitcoin and Airbnb dramatically transforming the competitive landscape of traditional markets, legacy companies are being forced to adapt their business models to stay ahead of the game—or just to keep up. Against this backdrop of change, the use of technology as a business strategy is no longer just the purview of companies in the tech sector. Digital strategies are now a critical facet of any business, in all industries, and the ability to use technology to drive performance has become a gauge by which CEOs are measured.

In most industries, leaders now recognise that the role of digital is rapidly shifting—from simply being a driver of operational efficiency to both an enabler of oppor­tunity and a disruptive force. If an organisation truly desires to be successful in its digital transformation, it has become clear that this imperative needs to be ingrain­ed in the company’s overall strategic vision—and that this vision must be driven by the person at the top.

CEOs today need to be digitally savvy, and must demon­strate the commitment to implementing a digital strategy. Some of the most established organisations in the world—from GE to Walmart—have in recent years trans­formed their businesses with leaders at the helm who recognised the need for fundamental change, and commit­ted to investing in the capital, structures, and talent required to effect change throughout the organisation.

“What’s happening is the way we relate to our customers is changing, it’s changing very fast, and it’s happening because of the innovative technology allows and the way people embrace it,” BBVA’s Torres Vila has said in an interview.1

Torres Vila knows all too well the threat posed by digital challengers, having headed the company’s digital banking operations before his app­oint­ment to CEO last year. He has seen how a surge of small fintech startups, with their highly specific focus and lean margins, can attack traditional incumbents from all sides.

“A lot of the startups choose one very thin slice of what a bank does. But there’s just so many of them that they encompass everything we do. In every little slice, you have like 10 companies that just do it better. They do it cheaper and they do it with better value for the customer.”

Whether it’s international money transfers or lending for small businesses, there are a number of new fintech providers now using cloud computing, leveraging APIs (application programming interfaces) and other technology to serve customer needs more conveniently and cost-effectively.

How is BBVA planning to compete? Torres Vila in his Money20/20 Europe keynote address highlighted the bank’s hybrid approach, which involves both collaborations with fintech providers, as well as focusing on revamping internal operations and the customer’s experience of the bank. According to Torres Vila, “BBVA will play an even more prominent role in the innovation ecosystem thanks to our internal initiatives, strategic alliances with fintech players and the use of our platform, by building open APIs, as key drivers of growth.”

To build a bank of innovation and disruption, BBVA has been looking to strengthen its digital capabilities through a run of fintech acquisitions. In March of this year, the company acquired Holvi, an online-only bank for entrepreneurs and SMBs based in Finland, after purchasing U.S.-based online banking startup Simple in 2014. The company is also setting the stage for more potential acquisitions and strategic partnerships, spinning out its fintech venture capital arm Propel Venture Partners in February of this year. “We want to build a portfolio of companies that are disruptive, that do things from scratch and can attack the incumbents, including ourselves,” Torres Vila has said.2

When it comes to internal transformation, a key tactic for BBVA is focusing on the customer experience. One of the ways it is doing so is by investing heavily in design. Last year the company purchased the 40-person San Francisco design shop, Spring Studio, to augment its capabilities for creating design solutions that produce satisfying customer experiences.

While digitally native companies—the Facebooks and Googles of the world—seem to adopt new technologies with ease, it is the successful transformation of more established organisations and industries that can prove the most instructive. These legacy companies typically face greater challenges in transforming their organisations, burdened by the weight of tradition and entrenched corporate cultures. All of which makes the role of the CEO even more critical to the goal of revolutionary change.

Industrious Thinking

As one of the original 12 companies listed on the Dow Jones Industrial Average index in 1896—and the only one still listed on the Dow Jones to­day—GE has a long history built largely on the sale of industrial equip­ment and maintenance services for its customers. Today the company is an oft-cited exemplar of successful digital transformation.

How did such a venerable company become a standard-bearer for the change? That bold push is largely credited to Chairman and CEO Jeff Immelt who has been the driving force behind the company’s response to a quickly digitising sector. In recent years, GE had seen increasing competition from a new slew of industry players who were not just selling equ­ip­ment, but rather using big data analytics generated by these machines to offer services that could help customers achieve better outcomes, such as improving productivity and performance.

Think of a jet engine, which might be equipped with hundreds of sensors capable of taking continuous data about conditions such as engine temperature, fuel consumption, wear of the blades or the external environment. All that data could be used to model better outcomes such as less fuel burn, information that would be tremendously valuable to customers. To an airline, for example, a one percent change in fuel burn could be worth hundreds of millions of dollars.

Foreseeing the coming “age of the industrial Internet”, Immelt recognised that GE needed to make drastic changes to its business model, or risk becoming just a commodity equip­ment provider in a rapidly evolving industry. As Immelt explained in an interview, “We know that there will be partnerships between the industrial world and the Internet world. And we cannot afford to concede how the data gathered in our industry is used by other companies. We have to be part of that conversation.”3

Immelt initially considered teaming up with a tech company to develop its software, but ultimately decided GE would be better off building its own platform and thereby shaping its own future in this changing market. The company has since added thousands of staff, including mathematicians and data scientists, and has committed to data and analytics as the key to transforming its global operations.

…the way we relate to our customers is changing, it’s changing very fast

Carlos Torres Vila


In June of 2016, GE sold off its appli­ances division to Chinese manufacturer Haier (after a previous sale to Electrolux fell through amid objections by U.S. antitrust regulators). The disposition of the appliance business is the latest in a series of moves by the company, following on the 2015 sale of most of its commercial leasing and lending businesses in GE Capital to Wells Fargo & Co. These moves are part of a pivot that sees GE turning its focus to large equipment and machines such as electric power generators, jet engines, locomotives and oil-refining gear, and investing heavily in developing software that can connect these devices to the Internet.

This past July, the company also announced a partnership with Microsoft that will make its Predix software platform available on the Microsoft Azure cloud for industrial businesses. The move will allow customers around the world to capture data from their industrial assets and take advantage of Microsoft’s enterprise cloud applications—accelerating their digital transformation across every line of business.

“We want to treat analytics like it’s as core to the company over the next 20 years as material science has been over the past 50 years,” Immelt has said. “We can hire the talent. We can evolve our business model accordingly. We need to treat our service agreements to share outcomes with our customers the same way an IT company might approach that in the future. So, in order to do that, we have to add technology, we have to add people, we have to change our business models. We have to be willing to do all those things.”4

Bricks and Clicks

In the list of top 3 e-commerce retailers (by annual sales) in the U.S., Amazon Inc., not surprisingly is ranked number one with sales of $79.3 billion. At number three is tech giant Apple Inc. with $12 billion in sales. In between, at number two is the more traditional bricks and mortar retailer Wal-Mart Stores Inc., with sales of $13.5 billion.5

For the retail behemoth Walmart, digital has been a growing focus since 2011. It was that year, led by then-CEO Mike Duke, that Walmart began its aggressive transformation into a global e-commerce leader. Speaking at the company’s 2011 shareholder meeting, Duke laid the groundwork for the company’s foray into digital: “We can combine our stores, our systems, and our logistics expertise into one continuous channel to drive growth and serve the Next Generation Customer around the world. In global e-commerce, we will not just be competing. We will play to win.”

True to those words, today the world’s largest retailer has also become one of the largest and fastest-growing e-commerce businesses. In 2012, the company hired Neil Ashe from CBS Interactive to lead Walmart’s digital efforts as CEO of Global eComm­erce and Technology. The division is responsible for developing strategies, platforms and applications that combine online innovations with physical stores to provide Walmart customers with a seamless shopping experience.

“We set about to build an Internet technology company inside the world’s largest retailer,” Ashe explained in an interview with Fortune at the 2014 CES convention in Las Vegas. “Our strategy…has been since then to build best-in-class e-commerce and marry it with the assets of the retail organisation so that we can do what no one else can do for the customer, which is [what we] think is the largest opportunity in e-commerce…the intersection of physical and digital.”6

Led by Ashe, Walmart is now focused on delivering on its enterprise strategy by investing in hiring the right talent, developing its global technology platform Pangaea, developing next-generation fulfilment networks to get its products to people when, where and how they want them, and delivering an integrated digital and physical experience. To bolster its digital capabilities, the company has also made a string of strategic acquisitions over the past several years – acquiring tech startups in mobile, data analytics, search, advertising and social.

“We’re building experiences so that customers can have an outstanding shopping experience in Walmart and Sam’s Club whether they’re in our stores or clubs or they’re out and about on their smartphones and their tablets,” says Ashe. “And it will continue to be an increasingly important part of our business.”7

Banking on Technology

Founded as a credit card company in 1988, Capital One has grown sub­stan­t­ially over the last two decades and today is the eighth largest bank in the U.S. by total assets.8 While its card lending business has been the foundation of its business model, the company learned early on that there was little to differentiate it in the credit card industry. So as early as the 1990s, Capital One began turning to data and analytics to under­stand consumer spending patterns in order to introduce products and offers suited to each individual consumer. Each year, the company conducts tens of thou­sands of digital experiments, offering credit cards with variable interest rates, incentives, and marketing techniques, so that it can use that information to custom-tailor its offerings.

Led by Chairman and CEO Richard Fairbank, Capital One has made digital central to the way it does business, both with its customers and in its operations. The company has invested heavily in digital technologies and has made a focused effort to enhance its digital service offerings through a number of acquisitions. In 2012, the company purchased ING Direct, the U.S. online bank of Dutch financial-services firm ING Groep NV. That year it also acquired Bankons, an early-stage mobile startup creating tools for banks to reward users based on their geo-location and purchase history. Other recent acquisitions have included the money management app Level Money, which had 700,000 users at the time of acquisition in 2015; and Monsoon, a 40-person mobile development shop based in Oakland, California.

It’s all part of Capital One’s aim to build capabilities that will enable it to attract a new generation of banking customers who prefer banking digitally over physical branches. But as Fairbank has explained, it’s more than creating the capabilities, it’s about creating a digital experience that allows customers to choose digital as their primary banking channel. “If you build it, they will not necessarily come…There is a huge need to systematically, as a conscious and high priority strategy, drive customers to digital.”9

Fairbank has spoken of how deeply digital goes at Capital One, and of the company’s goal to make digital the primary way for Capital One and its customers to do business. “[To] me the opportunity is really to create a company where digital is not a little channel that’s added on but it’s who we are and how we do business, even as we support some other channel. That is, we are absolutely focused on that destination.”10

Fashioning a Comeback

“I grew up in a physical world, and I speak English. The next generation is growing up in a digital world, and they speak social.”

These are the words of Angela Ahrendts, the former CEO of iconic British luxury brand, Burberry, in a video promoting the company’s partnership with The video was shot a year before Ahrendts was hired by Tim Cook at Apple to reju­venate the tech giant’s consumer experience as Apple’s new senior Vice-President of retail and online stores.

Ahrendts’ reputation as a savvy business and marketing whiz was solidified during her time heading up Burberry, where she was responsible for transforming a traditional and historic fashion brand into one of the most prominent players in the digital arena. In an industry not generally known for its digital shrewd­ness, Ahrendts transformed what was then an underperforming British fashion house into one of the world’s undisputed top luxury brands, with digital at the core of its transformation. Under Ahrendts, Burberry had set its sights on becoming the first fully digital luxury company. It was one of the first major fashion houses to create its own social media platform when it launched the Art of the Trench website in 2009 – ironically, harnessing new technology to return the company to its roots in promoting its iconic trench coat.

As Ahrendts explained in an interview, “We decided to target our marketing spending on the millennial consumer, in their 20s, and with a clear focus on emerging economies, where the average high net worth customer is typically 15 years younger. And we communicated and enga­ged with this younger customer using their mother tongue: digital, which would also give us the greatest reach for our limited marketing budget. That’s when the digital transformation started for Burberry.”11

In her first year at the helm of Burberry, Ahrendts committed 60 percent of the company’s marketing budget to a digital strategy, a move that would ultimately see the brand triple its annual sales in five years. The company’s Art of the Trench website also became one of the early pioneers of social media and the use of user-generated content—unheard of at the time within the luxury fashion industry.

Another big move for the company was to seamlessly integrate its online and offline brand experiences. In 2013 Burberry launched its London flagship store as a physical manifestation of The luxury retailer partnered with technology companies to create a 'retail theatre' concept, enabling Burberry to broadcast its multifaceted content to its stores around the world, while creating a modern and unmistakable brand environment. Catwalk shows were live-streamed to a large video screen, along with viral social media campaigns, while iPads and digital screens installed in the store showcased the brand’s heritage. Cloth­ing was also microchipped, allowing it to be scanned to reveal the background of the garment. These digital tactics are increasingly commonplace in marketing today, but Burberry was an early pioneer and continues to be hailed as one of the most digitally savvy luxury brands in the world.

Burberry’s digital transformation is more than just a success story for the retail industry. Silicon Valley has taken notice. Angela Ahrendts’ turnaround of the 150-year-old brand ulti­mately brought her to the attention of Apple Inc. And so, when Apple’s Tim Cook hired Ahrendts to head the pure-play tech company’s retail and e-commerce business, the high-profile move was particularly noteworthy for reversing a typical trend, in which legacy companies look to the tech industry to secure their digital talent.

The 'Leading' Edge

Digital is disrupting every industry. From autonomous vehicles to insur­ance powered by the Internet of Things, there are countless examples of how technology can upend even the most traditional businesses.

For companies to stay ahead of the digital tsunami, transformation must be a strategic imperative, and this imp­er­ative needs to be promoted by the company’s leaders.

Successful digital transformation demands a culture that encourages innovation, welcomes new ideas and empowers employees at all levels to effect change. While everyone in an organisation has a role to play in its digital transformation, a company’s CEO must be the driving force in propelling the strategy forward.

Employees take their cues from their leader. Those CEOs who only pay lip service to transformation, or view digital as “just another channel”, will fail to create the right behaviours and mindset in the organisation to drive the changes necessary to stay ahead of a rapidly evolving market. This is not to say that leaders need an IT background to lead transformative change. What they do need is the vision to see digital strategy as integral to their business, and the commitment to invest in the strategy for the long run.

Digital transformation is a profound change that requires more than just investment in the latest technology. It requires exploring new businesses and operating models, attracting and nurturing the right talent, and fostering the culture necessary for change.

As BBVA’s Carlos Torres Vila has said about his company’s transformation, digital is not a destination, but a journey. “It is not an isolated project or a function, or even a budget. It is about managing a sweeping change across the organisation, in the way the company carries out its everyday activity and, therefore, we all have to be involved in this process.”12

  1. Business Insider UK, “A €750 billion bank is using Facebook and Apple’s tactics to stop startups eating its lunch”, 4 April 2016.
  2. Business Insider UK, “A €750 billion bank is using Facebook and Apple’s tactics to stop startups eating its lunch”, 4 April 2016.
  3. All Things D, “GE CEO Jeff Immelt’s Big Data Bet”, May 2013.
  4. McKinsey&Company, “GE’s Jeff Immelt on dig­itising in the industrial space”, October 2015.
  5. WWD, “Amazon, Wal-Mart Lead Top 25 E-commerce Retail List”, 7 March 2016.
  6. Fortune, “How Wal-Mart is moving the needle on e-commerce”, How Wal-Mart is moving the needle on e-commerce | Fortune, 10 January 2014.
  7. Walmart, “Neil Ashe Discusses Global eCommerce”, Neil Ashe Discusses Global eCommerce, 22 April 2015.
  8. Federal Reserve Statistical Release, “Large Commercial Banks”, As of March 31, 2016.
  9. Bank Innovation, “Capital One CEO: ‘Digital Is Who We Are and How We Do Business’”, December 2013.
  10. Bank Innovation, “Capital One CEO: ‘Digital Is Who We Are and How We Do Business’”, December 2013.
  11. Capgemini Consulting, “Digital Leadership: An interview with Angela Ahrendts, CEO of Burberry”, 2012.
  12. BBVA. “Carlos Torres Vila: “Digital innovation will help people manage their money better”, 20 October 2015.