Does Digital Finally Have a Seat at the Table?

NEW YORK, United States — "A revolution needs leaders," says Luca Solca, managing director of luxury goods at Exane BNP Paribas, on the digital transformation reshaping fashion and the recent introduction of chief digital officers (CDOs) at some of the largest fashion and luxury companies.

In one of the biggest moves, this summer, LVMH appointed Ian Rogers, Apple's former senior director of iTunes, to the newly created position of CDO, giving digital a seat at the top table at the world's largest luxury conglomerate for the first time. "I am happy to welcome Ian into our group to strengthen our digital ecosystem. He will build on the foundations laid by Thomas Romieu, take the houses to the next level and explore new opportunities for the group in the digital sphere. Ian will bring his extensive experience in high-end digital ventures and his innovation-driven spirit to develop LVMH leadership in the digital luxury field," said Bernard Arnault, chairman and chief executive of LVMH, in a statement at the time of the appointment. (Thomas Romieu is the company's group digital director, who will remain at the company.)

“This is a signal LVMH has embraced digital for real; [that it] will be more and more integrated in its business,” says Solca. “A very senior role is required to lead the way, promote cooperation and remove roadblocks.”

Rogers is not alone. Senior digital appointments are on the rise across the fashion industry, with chief digital officers now in place at companies ranging from Westfield, one of the world's largest owners of indoor malls and an early adoptor of the CDO role, to Kering's luxury fashion house Saint Laurent.

Whereas once digital was relegated to the e-commerce team and a subsection of the marketing team, these moves reflect a newfound need to integrate digital into core business strategy. “There was some digital before, but the difference between now and then is that it was a subset of what people did under marketing and now it’s a department of its own and reports directly to the CEO,” explains Kevin McKenzie, CDO at Westfield. “The company recognised that the consumer was changing in the way that they purchased and the influence that they have from digital, and they thought it would be a good idea to hire someone to help educate them on digital trends, to articulate some thoughts and ideas on what that could mean for the business, and ultimately to develop a strategy for products and services.”

“Previously, the attitude was that we can continue doing great without digital, but that is finally starting to change,” says Perrine Corvaisier, CDO at Maison Ullens, a small Paris-based luxury brand established in 2010 and focused largely on leather and cashmere pieces.

For years, many luxury brands believed they could afford to move slowly on digital, because growth could be found elsewhere, notably in China. "As Patrizio Bertelli [chief executive of Prada] once told me: 'It's not that I am skeptical about digital, it's just that I have many more important things to do,'" recounts Solca. But a slowing China has changed the equation. "[E-commerce] is one of very few ways luxury goods companies can now grow," Solca continues.

Now, many brands are racing to catch-up with a luxury consumer that is more digitally active than the general population. “Digital is now the engine of the luxury shopping experience,” according to a report published in July 2015 by the Altagamma-McKinsey Digital Luxury Experience Observatory.

While e-commerce made up just 5 percent of the global personal luxury goods market in 2014, it is expected to reach 9 percent by 2019, with a total value of $27 billion, says Mario Ortelli, senior luxury analyst at Sanford C. Berstein. What’s more, online now influences over 60 percent of luxury purchases, making a robust digital strategy indispensible, Ortelli adds.

Indeed, a report by Solca entitled “Digital Frontier: The New Luxury World of 2020,” predicts that digital will become essential to more than e-commerce and marketing, impacting all stages of the value chain. “The development of digital capabilities will be a necessary condition for survival,” says the report.

While the ultimate task of the CDO is evolving his or her organisation towards this deeper and more holistic view of digital, there are often several near-term hurdles to overcome first, including how to define the role, says Ashley Friedlein, president of Centaur Marketing and founder of Econsultancy.

Friedlein points to two different types of CDOs. “Ambassadorial CDOs” are often put into place as an early bid to signal to shareholders that a company is serious about the digital opportunity. But they often have no real operational impact and work in posts that rarely come with a P&L attached, he explains. “The challenge for these people is that if the role is more about a statement of intent, or if it’s just about education or inspiration and they can’t fundamentally change the business, they leave,” says Friedlein.

What Friedlein called “transformative CDOs,” on the other hand, typically have a strong grasp of both marketing and technology (often sitting above or replacing the chief marketing officer or chief information officer) and usually come with an operational background. They frequently control product and pricing, and sometimes customer service and sales as well, and they know how to engender change, he adds. In September 2015, McKinsey published a paper with a headline suggesting that effective CDOs must be “transformers in chief.”

But making change is easier said than done. “You need to be a good internal consultant and a good internal sales person, and at the same time you need to be very analytical,” explains Corvaisier. At Maison Ullens, her objective has been to place digital at the heart of everything the business does. “I’m thinking about digital from the outside in, and the other way round. It’s a very broad role in terms of scope; it touches every part of the company.” Previously, she ran a similar, though much larger, team at Hermès as global digital director for e-business and communication.

Meanwhile, Francesco Bottigliero, chief digital and information officer at luxury Italian fashion brand Brunello Cucinelli, has a role that straddles digital marketing and traditional information technology. Part of his focus is smoothing internal integration. "Typically in our industry, IT is completely kept away from any digital project or decision; digital is more closely aligned with marketing and then there's cultural clash when they need to work together. So we decided to merge the two," he explains. But, ultimately, he wants digital thinking to permeate the entire organisation. "It will get into our manufacturing process, replenishment, design and more. We will move from traditional IT legacy systems into digital applications across the company."

While LVMH declined to discuss the specifics of Rogers’ new role, Ortelli says that, at a high level, his primary objectives will be to help the company’s senior management become more digitally savvy and to share best practices in digital across the group’s brands. “He’ll look to develop synergies and align the brands, and he’ll be there to act as an advisor on digital propositions put forward,” says Ortelli.

For all CDOs, integrating customer relationship management (CRM) systems is one critical area of opportunity. "CRM is the real future opportunity. Anything that helps brands improve this is something they will try to embrace," says Ortelli. But many smaller luxury companies, lacking their own direct-to-consumer e-commerce channels, don't have control over their customers' online data, explains Lindsay Nuttall, CDO at advertising agency BBH, which has worked with brands like Burberry. Much of the initial work to be done as a CDO, therefore, surrounds reclaiming data, she says. "The fact they've given part of their supply chain away to third parties like Net-a-Porter could prove an increasing problem over time. It can affect really practical things, like their margins, and really huge things like their route to the customer. By not collecting data on them, you don't understand how they're evolving."

Another issue, she adds, is not being able to connect the dots and identify individual consumers across touch points. “If I’ve spent £5,000 in a Bond Street store, [the brand] doesn’t know that I’ve also walked into the store in New York before that. And they definitely don’t know I’m shopping and spending online the other 90 percent of the time.”

To help address this, Westfield has just hired a chief data and analytics officer, Raqhav Lal, who will work alongside McKenzie and the company’s chief information technology officer, Denise Taylor. “Data is such a core part of digital that it made sense to add that pillar to our organisation, strategy and thinking. We hired a chief data officer to educate us, but also to create applications for how to use this data to better operate our business and create better experiences for the customer and the retailer,” McKenzie explains.

If it is successful, the role of the CDO is, almost by definition, an interim one. According to Corvaisier, who is about to leave her position at Maison Ullens to launch her own digital consultancy, CDOs should aim to make themselves redundant and exit the stage once digital has been adequately embedded throughout a business. “The role is to excite and show the way with digital; to set up a few guidelines and some technical points, so that the organisation can change and continue to lead on its own.”

Indeed, at digitally mature companies, digital strategy is fully integrated into overall business strategy, negating the need for a specific chief of digital. “As in the case of Burberry, the alternative is to have the CDO and the CEO roles coincide,” says Solca.

“In the 1920s businesses had chief electricity officers because it was such a new thing,” adds Friedlein. “This feels like that; a moment in time that will pass.”