Introduction
Digital disruption is a concept that analyses the behaviours and culture of a market industry or a process expressed in terms of its digital capabilities, channels, assets or technology that helps an organization achieve better market share and profit (Rosenstand et. al. 2018).
The introduction of new digital technology and business models affects and changes the value of the existing industrial service and goods and provides a significant scope for future development. Thus, digital disruption or transformation often comes with various challenges, which lead to change in the management strategy of an organization and can result in losses and failure, which needs to be addressed carefully.
This study focuses on the digital transformation processes in Adidas by analyzing its change strategy and the challenges the organization faces throughout the digital disruptions process. The study will further discuss the techniques, tools, and models adopted by the organization for new processes and development to fulfil customer needs and obtain a digital transformation strategy.
Task 1 – Change Analysis Proposal
Organization Overview
Adidas is a German multinational organization headquartered in Bavaria that deals in shoe designing, clothing, and accessories. It is the largest sportswear manufactures in Europe and second in the world. It was founded in 1924 and is known for producing athletic shoes which provide comfort, style, and luxury. Adidas is a premium category brand which serves worldwide area except in a few countries such as Saudi Arabia and
Adidas net worth was approximately $16.48 million in the year 2020. Adidas has always focused on innovating and customizing its footwear while coping with sustainability and growing technology. They have a distinctive brand image and positive perception globally. Adidas has made disruptive innovation an essential change in its strategy. They highly use 3d printing, data, and robotics to design their sportswear which fulfils customer demands globally and is sustainable. They are digitally present everywhere and promote their brand to enhance awareness, consumer simulation and demand.
Areas affected by digital disruption in Adidas-The impact and challenges.
Amid the COVID-19 outbreak, various companies were affected by the pandemic, which significantly impacted business operations. Adidas was affected by the lockdown and social distancing, which changed consumer buying habits and closed stores (Skinner and Smith, 2021). Furthermore, it also enhanced the resiliency of the supply chain, which impacted the overall sourcing strategy of the organization. Competition from Nike and other brands also impacted sales for Adidas. Adidas is hugely known for its sustainable measures of production, which need to be addressed carefully while making any shifts in the production line, manufacturing process or supply chains. Factory closures and shortfalls in the workforce caused production lag for months. Boycotts in China, the challenging market environment and reports of human rights abuse also reduced its global sales and brand reputation.
It also brought into the picture the management challenges related to the digital economy, leadership efficiency, operational cost, and the overall business strategy. The supply chain disruption became a significant cause of concern for the organization as it slowed down the pace of the sales and manufacturing processes. The idea of embracing digital transformation became a massive challenge as it brought shifts in operations and costs. Retaining customers, engaging employees, cutting costs and enhancing product value was a task that needed immediate change and innovation.
Objectives for the next five years to be fulfilled by Adidas
- To attain the goal of €9 billion in online sales by 2025 while maintaining profits and climate neutrality.
- Digitalize the entire value chain process starting from the creation till the selling to the customers.
- Expanding its data, technology, and expertise by increasing tech teams and finding more digital talents.
- Investing in the new ERP system and full AWS integration to streamline the company’s global supply chain and other operations.
- Operating profit margin of 12-14%by the year 2025 using recycled and biodegradable materials and investing in e-commerce.
Task 2 – Data and Decision procedures
Amidst the current competitive times, data plays a crucial role in making decisions and enhancing business value. Every business must make informed decisions that can facilitate better marketing operations and improve sales and profit margins for the organization. Adidas has chosen digital transformation as a crucial decision to shift from product-centric to consumer-centric to enhance consumer experience and satisfaction and keep the profit margin high.
Techniques and tools
To address the above challenges, Adidas can use several techniques and tools mentioned below:
- Robotics and AI:Using Automation, Adidas can shift its output from conventional production to digital production (Erol al. 2020). This will have them integrate the design and production process catering to a specific market. Further digitalizing IT development brings the sports industry towards new change and induces innovation.
- Internet of things (IoT):Adidas has developed an IoT-powered smart football with a sensor which can detect speed, spin, flight and strike path. Moreover, they are also developing IoT-based apps which carry and analyze player performances. Using IoT will bring them closer to the consumer world and make interactions powerful and personalized.
- Using machine learningand intelligent variable technology, Adidas has produced a GMR smart wearable which helps to keep track of physical movements and is an app for players.
- Data assistants:It has also developed a new technology known as strung, which transforms athletic data into dynamic performance output (Behr, 2018). This innovation changes how shoes are designed and offer capability besides comfort and luxury. Using data supporting production and innovation can be highly beneficial for technological advancement, future demand, and the market environment.
Digital management and processes:
- Adidas has digitalized its supply chain by using database designs and integrated it with suppliers and retailers by doing real-time planning and inducing automation in manufacturing physically to bring itself closer towards the customer and change the production (Ng al.2020).
- It has used the Omni-channel initiative through its own retail stores and highly uses E-Commerce for distribution (Carr, 2019). The company has invested in RFID to allow online buyers to collect and store information regarding inventory and access to the economic platform.
- The company has also decided to change its manufacturing units. It has induced speed factories to locate fast fashion, whereas the traditional units have been minimized, and supplies are more motivated to improve the services for conventional production (Galluccio and Agrell, 2022).
- Speed factories have become a different business model for complementing their operations, continuing strategic partnerships for better interaction with the global world and transforming traditional practices to fill the manufacturing gap.
- Besides this, Adidas has shifted to facilitate online presence and increase falling sales by digitalizing its entire value chain and creating a new business plan for this organization (Edwards, 2019). It has been using artificial intelligence in supply chains and 3D printing to extend the digital transformation plan.
Digital systems to enhance decision-making:
An organization needs to shape its architecture and form a brand image to digitally transform its systems and infrastructures to bring positive changes and enhance quick decision-making. Using data analytics and hyperawareness Adidas can attract more growth and improve its overall strategy. It increases credibility and helps to create something new while carrying the confidence of the old and attracting more growth prospects. This provides room for more customer satisfaction and sustainability (Hanelt et. al. 2021). Looking at Adidas, it can be said that a digital agility model will help them successfully execute the strategy of investing in a digitally transformed company with a new approach, expertise, and brand image while getting top-line growth.
It will also help by following this strategy; Adidas must invest in digital transformation and work with leading agencies to create content for specific countries to save time and cost (hyperawareness) based on data insights and digital tools. It can also use automated processes to personalize messages and executes paid media campaigns (Venkatraman, 2017).
This can keep its business and employees encouraged towards agility at every state and give importance to the change factor by closely filling the gaps and handling changing environment (making informed decisions). This, in turn, will enhance its digital capability by strengthening online ties with its customers, suppliers, and retailers. Furthermore, effective team structures and flexible work environments possess better success chances and efficiency (fast execution). This transformation at all levels, including leadership, can help the firm determine future success and growth (Albukhitan, 2020).
Figure 1: Digital agility model
(Source: Building a team for digital success, 2022)
Task 3 – Implementing digital culture
Rowles and Brown (2017), opine that disruption is the key reason for bringing a digital culture into action as the change in recent technological advancement, consumer buying habits, the market economy, and global boundaries have opened various possibilities for organizations.
This has triggered the digital transformation cycle to make organizations fit for changing the environment. The digital capabilities, including IT, technical infrastructures, resources, employees, consumers, management, and market trends, needs an overall strategic approach to go digital and adopt a business model where organizations can frame a digital culture to transfer the overall business. Examples of Uber and Airbnb are apt for such cultural transformations using digital technology.
According to Sepoetro (2018), Adidas must redefine its physical stores to strengthen and increase its relevance which gen Z customers. This can be done through a participatory approach where the internal and external stakeholders, designers, and the creative team can bring transformations by creative upskilling. Here the focus will not be on physical consumption but on a service that can get a broader impact on the consumer’s life.
Sustainability is the fashion industry’s future. It drives growth and success. Jain et. al. (2021), support this idea, that sustainability provides economic benefits and a competitive advantage.
Through this, the organization can think innovatively to produce something new and different. Recently Adidas has launched a strategy in which it asks its customers to return their used products and then recycle them to make new ones. Using sustainable sources and recycling products reduces overconsumption and wastage and enhances brand image, cost-effectiveness and future growth. This can be done by digitalization, where technologies like big data, robotics, automation, cloud computing, IoT and others can help bring transitions in sustainability and innovation (Seele, and Lock, 2017).
Recommendations for Adidas
- Adidas must form digital capabilities by developing a relationship with offline and online customers. It can expand its digital presence through programs, apps and promotional offers to reach the maximum clients. Social innovation via digital technology is a powerful tool which can be leveraged to make profits (Zhukovska, and Salimon, 2019).
- Adidas can form personalized digital content for each zone to strengthen local sales and boost promotions on automation platforms.
- It must focus on brand credibility, consumer experience and digital architecture to enhance innovation and sustainability. Building a direct relationship with its targeted customers will help the firm to address consumers and attain growth.
- Investing more in digital transformation will help the firm process the entire value chain with the help of data and technology (Venkatraman, 2017). This will create an innovative mindset for both internal and external stakeholders. Drawing digital culture from the manufacturing process until the last customer sales and service, Adidas can transform and revolutionize its technology game (Zhukovska, and Salimon, 2019).
Task 4 – Collaborative Team Leadership
Petry (2018), to address digital disruption, it is crucial to understand the market conditions and transform the core business by applying suitable strategies and techniques that provide desired performances. It requires a strategic framework which involves both internal and external stakeholders to transform and a large number of skills and capabilities for responding towards digital disruption (Schwarzmüller et. al. 2018).
Leadership capability is required at every stage to succeed in the digital world, which involves addressing the cognitive, behavioral and emotional transformation to support the whole organization and lower resilience. The leader must think, act, and react differently to handle the various possibilities and opportunities in the virtual world and make decisions while collaborating with different stakeholders and motivating employees to contribute and reducing resilience while leading the driving change while using digital tools and techniques.
For Adidas, two leadership styles are discussed below:
A participative style is exclusively suitable for Adidas as this formal leadership framework induces conference, collaboration and creativity. As the organization understands cooperation is needed at every level, it must provide enough space for its employees to be creative and innovative.
The participative collaborator style usually involves the employees making decisions together via negotiation. The leadership style helps employees encourage and share their views, which brings more innovative solutions and enhances employee participation, making decisions more quickly across all departments (Can, 2021). This will help in strengthening coordination among different departments, such as creativity and flexibility in designing, targeted prospects for sales, budgets for accounts and employee engagement for HR.
The concept of conceptual skills can also be applied to bring positive results and solve various problems from a more critical perspective. The new concept will help a leader explore existing relationships while presenting solutions and developing a customer-centric marketing strategy to improve performance According to Sicoli et. al. (2019), analytical skills which help in visualizing different ideas will bring more desirable decisions.
This can be done by gathering data insights from different stages and making it a part of an organization’s culture to help solve complex issues. This level of functionality will help in problem-solving and ensuring desired and positive outcomes.
Transformational leadership is another such leadership which can be applied in Adidas to build transformations and help employees succeed on both the personal and professional front (Press et. al. 2021). This will help the firm achieve the overall goal and bring agility and align employees, teams, and leaders under a single cause. This will enhance commitment, efficiency, productivity and creativity for organizational success.
Such leadership will not only bring change but also help understand the need for change and encourage participation while bringing personal integrity, genuine communication, and customer and employee loyalty.
Adidas can choose any leadership style or a combination of both to develop a culture of collaboration and creativity among the team members.
This will bring trust and accountability while increasing decisiveness and passion (Weber, 2022). Both leaders and employees will seek a positive impact and help the firm address the change in the long run. Adidas follow a development experience plan for managers, directors, and executives to support the development of leadership skills which provide future leaders. Adidas also believe in succession planning and, therefore, often develop executive for further roles in the organization.
Conclusion
To conclude, it can be said that globalization fosters digital transformation due to changes in technology advancement and extended business projects. Organizations like Adidas must cater for a transformative culture which enhances development and provide them with business insights and desired outcomes.
With the help of innovative technology, sustainability, and digital capabilities, transformation leadership, employee engagement, customer interaction, digital tools, and personalization can provide immense growth and Competitive advantage to the firm to explore the industry entirely.
Moreover, the digital agility model, data techniques and investments in R&D will further accelerate the digital transformations. The firm must align its core processes with market trends to make informed decisions and provide the needed product to the consumer to enhance satisfaction. A digital culture will be more cots and profit effective and eliminate chances of failure if addressed carefully and efficiently.
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