How Digital Is Your Company?

So great is the promise of e-segmentation that today e-commerce is achieving the overnight status of e-hype. But the overarching lesson of e-segmentation is that thinking digitally takes you beyond the narrow confines of the Web. Creating a Web site does not make you a digital competitor, any more than opening a store makes you a successful retailer. Moreover, thinking digitally can also help you recover lost ground -- if you've been left behind in a sudden, unexpected business-model shift. Take the case of Levi Strauss & Co., the $6.9 billion, San Francisco-based jeans maker. The jeans business is all about fashion -- and fashion is all about fickle customers. A few years ago, Levi Strauss saw its core customers declare Levi's jeans decidedly unhip. The company closed 11 U.S. plants, launched a new ad campaign -- and moved aggressively into e-segmentation, using digitization throughout its retail system to reestablish customer relevance.

In 1994, the company initiated its Personal Pair program: Women who were willing both to pay an extra $10 to $15 over the usual price of jeans and to wait an extra week or two for delivery, could go to certain Original Levi's Stores and have themselves "digitized" -- that is, have their measurements taken and a pair of jeans custom made, and then have the information stored in the company's database for future purchases. And the result? The Personal Pair program achieved a repeat-purchase rate that was significantly higher than the 10% to 12% rate of Levi's typical customers; and by 1997, the program accounted for 25% of women's jeans sales at Original Levi's Stores.

The message to Levi's was clear: With digital technology, customers could not only segment themselves, but they could also serve themselves. The company incorporated these ideas into its Original Spin program, which rolled out in the fall of 1998, making the digital experience available to men and doubling the options for all customers: Levi's now offers an impressive 1,500 different styles.

Although the program is only a few months old, Levi's can already smell success. The Original Levi's Store in New York City, for example, is so busy that customers sometimes wait up to two weeks for an appointment. Moreover, Levi's is seeing much lower return rates than anticipated, and much higher numbers of jeans purchased per store visit -- up to ten times as high as the traditional buying experience. And the program has given Levi's a new shot at the all-important, highly influential youth market -- a market that is less concerned with fit than with the "cool factor" that comes with a new styling experience. Perhaps most important, Original Spin gives Levi's a new look at the always-changing world of consumer tastes.

And, in a reversal of the normal e-hype approach to e-commerce, the company has taken its in-store digital experience to its Web site: Visitors to the Levi Strauss Web site can now check out subsites featuring the company's different product lines, such as silverTab and Hard Jeans. The e-segmentation lesson: When you're trying to answer the questions, "Who is my customer? What does he or she really want?" let the person who has the best information provide the answers -- your customer.

How digital is your company?

Digital finance. digital recruiting. digital segmention. What is this all about? Is it about technology and the revolution in information that is transforming how companies do business? Or is it about strategy, and the ways in which the boundaries of competition are giving way to new business designs and new ways of thinking about competition? The answer: Going digital is about technology, strategy, and more. Ultimately, it's about finding new solutions to old issues.

Becoming a digital company requires the people inside the organization to execute a series of challenging mind flips. They have to think differently about finance -- and turn the old model upside down. They have to think differently about recruiting talent -- and turn that model inside out. And they have to think differently about customer segmentation -- and turn that model back to front. Executing any one of those reversals is a lot to ask of most businesspeople, particularly at a time when people are so focused on the work at hand. Finding the time and the emotional energy needed to reverse the three most fundamental aspects of their company's business design seems like a monumental task.

And yet if you do rethink your company's business design, the result is a liberating experience. The simple organizing principle that cuts across the core tasks of almost any company today is, in fact, a revolutionary-conservative concept: Redistribute the work that needs to be done to the people who are best equipped to get it done.