World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version - Page 89

additional content You mentioned wanting to be “best in class” in operational excellence. What’s an example of something you’d want to be known for? RØRSTED: That takes us to our fourth accelerator: digital. We called out digital as an enabler because we did not have enough of a company-wide focus on it, or frankly the right competencies on board. So we created a digital leadership team to look at all of the projects across the company. We did not want to have one comprehensive digital agenda. Instead, we split the digital agenda into important projects that we could execute quickly and meaningfully. If you try to build Rome all at once, it never happens in time. Digital has a tremendous impact on the way that you can tailor your product to individual athletes. You can have a customized midsole in your running shoe, adjusted for the shape of your foot. This type of customization will grow more popular over time, starting at the high end. We produced 5,000 pairs of those customized shoes in 2017, and we’ll probably make almost 100,000 in 2018. Eventually, we’ll be producing a million a year. Will you use 3D printing to produce shoes to order, sold right from pop-up digital factories? And if you don’t, are you afraid that a competitor or a retailer might? RØRSTED: You’ll see that technology coming up more and more, but consider the numbers. We made 402 million pairs of shoes in 2017. Our Speedfactories, when they are fully running, will make 500,000 pairs each, annually. Local pop- up factories will happen, but they will be marginal in the bigger picture. I don’t think new competitors or private labels will be a threat for branded athletic wear. People still want the three stripes and the swoosh, and I don’t think that will change. Given the growth of platform manufacturing, will the factory and the brand split apart, with operations shared across the industry? RØRSTED: That’s almost happening today. All our manufacturing is outsourced. And if you go to Vietnam, you will find the same suppliers making products for us and for Nike and other sports brands. The value creation takes place in design and in the materials and functionality. Less in the physical build of the product. We are also improving consumer experience. We launch new products every week, and the most effective way of launching products is through digital media. We’re particularly interested in mobile devices. We have to be world class at that; if we’re not, we can’t win, because at the end of the day, we are a consumer company. And our primary engagement vehicle is the smartphone. We gave our e-commerce group — the group that manages Adidas.com and Reebok.com — a target. We had sold €700 million (US$777 million) through our site in 2015, about €1 billion (US$1.1 billion) in 2016. We set a target of €4 billion (about US$4.6 billion) in annual revenues by 2020. To meet that target, the team has control over its hiring, organizational structure, and compensation system. We don’t know if it is achievable, but we know that by putting a very aggressive plan in place, we will drive the right mind-set. In 2016, we said publicly for the first time that our online store was our most important store globally — period. This made it clear to everyone in the company that we were changing our priorities. We would start deliberately cannibalizing our own infrastructure. It also provokes conflict with partners. We sold the World Cup jerseys this year exclusively on Adidas.com for the first two weeks. Our wholesale partners were shouting: “Why are you doing this?” The answer, of course, was that it was necessary: We have to be where the consumer is — and this is online. In general, the clearer we can be in formulating and articulating our strategy, and the clearer we become in saying, “Here is what ‘good’ looks like,” the easier it is to go through this change. For example, any new product now must be launched either online by itself or online in combination with our six key cities. Not everybody will like this. It sounds like you see the company’s chances for success as less a matter of external threats or trends, and more a matter of your own decisions and execution. RØRSTED: We know the sports apparel industry will continue to grow. Sports are increasingly popular around the world. The need to combat obesity is driving people to be more athletic. And there are trends toward leisure and more relaxed clothing in the office. In contrast to other sectors, we are not seeing consolidation; we’re seeing accelerated growth. If we were in another industry, growing 2 percent per year, we would need to raise our leverage and look for a larger market. But if you’re in an industry that is growing 5 percent or more, like ours, then your biggest opportunity is to get your company in top shape, because the market will be there. Interview by: strategy & supported by EUROBAK 87