The digital transformation among Russian businesses

Excerpted from the original Russian study published by Nielsen Russia.

Previously, RSM covered how Russian consumers have responded to the digital revolution. We highlighted a few sectors that have experienced explosive growth in just a few years and explored the main benefits that consumers expect from the technology they use every day.

In this article, we’ll look at what Russian businesses in the retail and FMCG sectors are doing to push digital transformation and what results they hope to achieve.

Business today

The Russian consumer’s expectations tend to be very logical: they are open to new technologies and willing to actively implement them in their daily lives if the benefit is obvious. But are Russian businesses in the retail and FMCG sectors ready to meet consumers technological expectations?

Nielsen’s recent study Technological Trends in Marketing and Consumer Life shows that a quarter of the CEOs and marketing directors surveyed consider their companies to be digital pioneers. They are actively implementing or are already using technology that automates manual labor or relates to the internet of things, artificial intelligence, augmented or virtual reality, robotics, and other data and process automation.

Digital transformation among Russian businesses

Half of the respondents gave themselves an average maturity rating, with the rest marking themselves as above or below average.

However, the consensus within the FMCG and retail industries is that digital transformation is one of the key development priorities. Of total respondents, 55% felt this to be true. When asked about priorities over the next three years, this figure rose to 85%. Furthermore, 20% of companies noted that fostering digital transformation had become their main priority.

Digital transformation among Russian businesses

Executives hope that digitalization will help to increase customer loyalty (73%), enable them to respond more quickly on the market (69%), and reduce costs (65%). Furthermore, they plan to invest in digital services primarily as part of their short-term and mid-term plans and expect to see a return from them in the near future. Two-thirds (67%) of respondents expect that their investment will pay for itself in less than two years, and 85% expect to see a return in less than five years.

Barriers and approaches to digital transformation

Any step forward should begin with an objective assessment of one’s current situation. This can prove difficult, as 76% of companies lack sufficiently qualified staff and expertise in the departments responsible for implementing a digital transformation strategy. Other factors hindering digitalization include a lack of preparation among business structures and processes within the company (61%), insufficient budget (51%) and insufficient IT infrastructure (49%).

These difficulties are reflected in how companies approach digitalization. Processes, structures, roles, and responsibilities start to transform from within the company.

All this leads to the emergence of new mechanisms for making decisions and measuring performance. Managers actively work to adapt corporate culture and implement agile methodologies (69%), and make operational changes to improve their company’s ability to adapt (63%).

Additionally, 61% of respondents implement data management ecosystems that unite all divisions within an organization in order to improve efficiency. Of total respondents, 84% believed that the importance of data management ecosystems will grow over the next three years, and stated that this approach will top the list of digitalization priorities for businesses. Among other important vectors of development, introducing solutions that accelerate the process of collecting feedback from customers in order to personalize services or products was seen as very important (this number increased from 49 to 73%). Automation linked to implementing artificial intelligence, machine learning and Deep Learning are also seen as increasingly important (increasing from 20 to 41% of respondents).

Technology in marketing

Marketing departments are at the forefront of efforts to implement digital technology: 69% of managers in the retail and FMCG sectors noted that marketing departments are typically responsible for implementing digital technology. Other departments like finance (65%), logistics (61%), and HR (53%) were further down the list. Today, the main areas of digitalization that marketers are concerned with are ad personalization and data management. The most popular tools that marketers use allow them to personalize ads and online content, analyze data from both internal and external sources, and manage data. In the next three years, the most popular functionality will expand to include real time analytics, and big data analytics that will allow marketers to make connections among disparate information.

Digital transformation among Russian businesses

Real-time analytics based on big data will become the basis for making decisions more and more frequently, allowing companies to significantly optimize their operations. For example, the truck manufacturer Navistar tracks more than 180,000 trucks online, noting where drivers refuel, how well they drive, and whether any products were damaged during transportation. This has already helped them reduce fleet maintenance costs from 15 cents to 3 cents per mile. Similar results are being achieved across all industries — from retail to urban planning.

As we see, Russian consumers and businesses are moving in a similar direction when it comes to digital transformation. Both are receptive to new technology and willing to innovate, and businesses are creating ecosystems to manage their data, and transform their operations and corporate culture.