Alexander Brunst is responsible for digital initiatives at Xella, an established building materials company and knows that agile methods are the way to go. Here, he shares his insights into using agile to become a digital leader.
Which approaches should be adopted to optimize the implementation of digital innovations in a large company?
Basically, there are three major points that are crucial for any digital initiative within an established company:
- The entire management team has to believe in its long-term potential.
- The organizational setup is where you are most likely to go wrong. What we have done at Xella is to set up a separate and rather independent digital unit of people who are mostly external but bring new skills and are socially competent. On our team, we have an architect who has been working with 3D planning for years, an expert on CRM systems, another one on apps and development, then there’s me.
- The operational execution. From the get-go, you need to set up programs where you have a clear business case and clear goals that can be tracked, as well as a healthy dose of persistence and willingness to work in a very agile way.
How can agile methods be helpful for the operational execution of digital initiatives?
Agile methods accelerate the processes and allow the company to implement and bring the solution much quicker to the market, which contrasts with the traditional corporate processes.
At Xella, we developed an app for our clients with the Scrum methodology with a very small team. In two months, the product was launched. The process would have taken six to eight months if we'd done it in a traditional way. The idea was to focus on quickly launching the minimum viable product and adapt it afterward based on learnings from users. We were trying to find a very lean solution. But I don’t think agile methods could be applied equally in big corporations and start-ups. For example, a big corporation is much more bound to regulation than a young start-up, in particular in terms of data security.
I would assume industry-specific digitalization progress also plays an important role. Does the construction industry still have a lot to catch up on in this regard?
Definitely. There is a study by McKinsey that found that the average labor productivity increase of the overall economy over the last 20 years is around 1.32% per year, while that of the construction industry is around 0.26%. There is still a lot to do when it comes to digitalization — in particular the automatization of processes — or cost efficiency; and we’re already seeing the beginning of these productivity increases. Indeed, in the traditional building process, little effort is put into the planning phase, as the focus is on the actual construction.
Lack of good planning can lead to major cost overruns and a lot of frustration for the players in the industry. Fixing errors afterward is around ten times more expensive than fixing them in the planning stage. We are working on introducing digital planning to prevent errors, find better products for the buildings and plan the whole process in a more integrated way. The ordering processes in our industry also need to be shortened and more transparent for the clients. To do this, product data needs to be structured and brought into one. This transformation requires investment and a lot of time for established companies but is necessary to survive in the next years.
Do disruptive innovations endanger traditional players in the industry?
It’s not a threat specific to the construction industry. Digitalization means you gather data that helps you to understand the customers’ needs and react to them very fast. Therefore, you can serve the entire globe at much lower costs. It has to be the core competence of any company chasing success in the digital age.
At Xella, we developed an app for our clients with the Scrum methodology with a very small team. In two months, the product was launched. The process would have taken six to eight months if we'd done it in a traditional way.
How was digital transformation introduced at Xella and what kinds of risks are involved?
We decided to be a digital leader in this industry, which means that we don’t want to wait for others to make the change. We want to create that change, which means that we need to proactively shape the market, identify other innovative players and develop services for them. Obviously, risk is always involved in trying something new. Therefore, we need to be very agile in our daily work and try to find ways to bring the market forward. That is the biggest challenge right now.
When we started implementing digital solutions, we found out that the market and customers didn’t respond to it as we had hoped, so we changed our approach a bit. Instead of focusing on digital and Building Information Modeling, we are actually paying more attention to the benefits for our customers. Our main goals are to be more cost-efficient, and quicker and to prevent errors. Only through those first learnings did we find an approach that now actually works very well, specifically in the German market.
Can you tell us more about the digital initiatives that Xella is exploring?
The digital initiatives are separated into internal and external phases. Internal phases are meant to improve our core business of selling materials. An example of this is setting up a new CRM system for the entire company. Having the right database and knowing which customers come to you, when, and with which demands, is the key to serving them in the best way.
The second phase, that we’re currently running, is setting up a global product database for an e-commerce player. For example, we organized a venture screening and have now screened over 450 ventures across the globe to identify what kind of innovation is coming from new players, and how we can cooperate or invest in these start-ups in order to benefit from their agile working methods and expand our core business through these services.
What’s your favorite thing about accompanying a traditional industrial company with a non-digital background on its way to agile transformation?
What I really find fascinating is the combination of great tradition with the digital aspect. I believe this will be the core challenge for all European companies to stay competitive. When you look at the ten most valuable companies on the planet right now, most of them are new digital players, for example, Amazon, Facebook, or Google. Very few of these companies come from Europe, which means we actually have a lot of catching up to do. We will only be able to do that if we really combine the core competencies of our past with the benefits of the digital future.