September 30, 2023

Nestlé takes the digital challenge

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By Erika Morphy From fDi Intelligence

Nestlé is reorganising its global operations, with its digital strategy being given a complete overhaul. But, asks Erika Morphy, will this be enough to reverse its recent poor performance?

Driven by unhappy investors and a market that has been dismayed by its financial performance, Nestlé has been taking aggressive steps to reorganise its global operations, and IT in particular.

This process has not been a pretty one, however, as it has entailed cutting hundreds of jobs in its home market of Switzerland – a bitter blow to both employees and to the local government (which had urged the company against this step). In response, Nestlé has promised to do what it can to mitigate some of the pain and is in talks with third parties and partners who have expressed an interest in recruiting its IT workers.

Save and transform

Despite this, Nestlé is determined to wrest something positive from these events. It is reorganising its IT department not just to consolidate and save money, but also to “accelerate its digital transformation”, according to a statement made in early 2018. As it does so, multinationals around the world will be watching with interest, considering the scale of the challenge.

Many companies can attest to the difficulty of the process. Creating a ‘digital first’ company entails a virtual rebuilding of the company from the ground up based on the latest technologies. All aspects are affected, from the supply chain to human resources to financial planning and forecasting to customer service and the employee experience.

Nestlé will establish dedicated operational centres in Spain and Portugal to benefit from existing e-commerce and supply chain hubs. It intends to create a centre of excellence for boutique operations in Italy and wants to access wider digital skills and to benefit from IT innovation.

At the hub

Establishing hubs for specific expertise is the norm and, as new technologies emerge, companies are recognising that some global regions excel in specific methodologies. Many multinationals seek to set up their innovation hubs in San Francisco, for example, while others look to locations in eastern Europe, Asia and South America to focus on niches such as graphic design or supply chain logistics.

In Europe, many cities have their own unique identity. Charlotte Brown, founder of the digital consulting firm VSNRY, recently wrote in a client note: “Tech City, dubbed ‘Silicon Roundabout’, in London’s East End was initially just a few technology firms who found cheap office space. However, in recent years it has become the prime location in the UK for start-ups and creatives to call home, and has received a significant amount of investment with the aim to become the digital capital of Europe.”

In the US, multinationals are discovering pockets of innovation outside California. Indian tech giant Infosys has opened hubs in Indianapolis, Indiana; Raleigh, North Carolina and has announced future locations for Hartford, Connecticut; Providence, Rhode Island and in the state of Arizona.

Google, meanwhile, is opening its first AI centre in Africa, choosing Accra, Ghana as the location. Announcing the decision earlier in 2018, Google said: “In recent years we’ve witnessed an increasing interest in machine learning research across the [African] continent.”

Efforts to date

As it embarks on its new strategy, Nestlé can count several digital initiatives as successes, according to Sam Olmsted, a consultant at Align. These include establishing a digital acceleration team (DAT) and encouraging a culture of social networking within the company.

The DAT is charged with training employees to be able to handle the digital side of the business. Mr Olmsted says: “This includes everything from social media marketing to search engine optimisation.”

Its second task is to locate and experiment with digital trendsetters to discover new approaches to advertising, he adds, saying: “By developing a team devoted solely to digital, Nestlé has been able to find innovative approaches to boosting [its] digital footprint.”

Nestlé has also created social media presences for all its subsidiaries by forming close partnerships with Facebook and Google, according to Mr Olmsted. “An even more defining use of social media within Nestlé has been the company’s development of an innovative internal company social media platform for its more than 200,000 employees,” he says. This allows employees to share ideas and strategies, which are then ranked according to which is the most innovative.

But are these various pieces enough to knit together a digital transformation strategy?

How deep a transformation?

It is important to understand that digital transformation can mean many different things to any one company, according to Ms Brown. “It can refer to how you provide your product or service to the customer. It can be about how you manage and grow your company. Or [it can be] from a service and operational perspective,” she says.

Some companies such as Nestlé, which are setting up operations and innovation hubs in different countries, are still testing the waters, she adds, saying: “They are not necessarily integrating digitalisation deep within their operational core just yet.”

Adding global operations to the mix certainly makes an already complex strategy and implementation process more complicated, but it is feasible. “This is something that is happening all across the globe. At the very least, almost all companies want to understand what digital means for them. Where many are hesitating is in deciding on the right investment path and in the implementation,” says Ms Brown.

While some companies are plunging wholeheartedly in the process – which can be risky as mistakes can be very expensive (if not fatal) – others, such as Nestlé, are using recent events to drive a more methodical move to digital.

This article is sourced from fDi Magazine

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