Innovative Companies Are Disrupting Themselves Before Being Disrupted

Author: Jana Durneva- Digital Manager and Customer Care at Philip Morris, North Macedonia

Published on: September 28, 2020

In today’s dynamic environment, continuous innovation is vital if a company wishes to thrive. Resting on decades-old business models and hiding behind heritage as an excuse is no longer an option. Strategic transformation – adapting a core business to disruptive change while also creating new growth around new products, services, or business models is the imperative of the 21st century. Embarking on a transformation journey can be driven by the threat from a disruptive competitor, growth just hits a wall, financial crisis, opportunity to ride a global megatrend, or sometimes it’s simply the result of systematic planning for the future.

While it seems easier in the short term not to undertake or delay the challenge of change, there are examples of successful transformation. Microsoft has transformed from a business model based primarily on selling products, licenses, and devices to a cloud-based platform-as-a-service business, or Netflix that shifted from DVDs by mail into the leading streaming video content service and now a top original content provider. Amazon with AWS, Adobe, etc.

One of those success stories of corporate shift is Philip Morris International. The world’s most successful tobacco company has embarked on a journey with a mission to disrupt its own industry by replacing the cigarettes with smoke-free products, to address known health risks of cigarette smoking, changing consumer habits, societal expectations, shareholder desire for sustainability, and the challenge to deliver the right products to adult smokers.

On the other hand, there are companies that simply misread market changes, inert to innovation that missed out on opportunities. There are quite a few examples of most iconic brands that failed to innovate and were then forced to declare bankruptcy, like the biggest Netflix competitor – Blockbuster, a textbook example of a video rental company that did not stay up to date as its market transformed with other entertainment options in the digital world. Blackberry, Kodak, Yahoo are some of the many famous names that lost the spotlight. The reason why they ended up the way they did is that those companies that invest heavily in their systems or equipment and don’t want to invest again in newer technologies, tend to focus on what made them successful and don’t take notice when something new comes out, or they were simply too focused on their current market and don’t prepare for change or technological shifts in the marketplace.

Digital transformation – hot topic and a necessity

Digital is a strategic priority for many businesses in recent years. The goal of “going” digital is discovering new frontiers and using innovation and technologies to push the business even further. It’s about finding new possibilities for an existing service in order to design and deliver a better experience for customers and to improve engagement, efficiency and business decision-making, leading to transforming the business. However, 2020 has made a significant impact on every aspect of the way societies function, companies do businesses and individuals’ habits and lifestyles. Covid-19 has become the digital accelerator of the decade. The pandemic has caused major social shifts and changes in customer behavior, forcing companies to innovate. During this period, digitization, digitalization, and digital transformation have played a crucial role in ensuring the business continuity and survival of the companies.

Digitization, digitalization and digital transformation are not the same and each one of them has a different meaning and every company is in a different stage of adoption of digital technologies. Digitization, in short, is the process of converting content in digital formats e.g. paper bill to pdf. Digitalization is the utilization of digital technologies to improve processes (e.g. payment of the bill online or e-commerce), thus making serious improvements to operational models, bringing efficiency. Digital transformation, on the other hand, is leveraging emerging technologies to build new business models and new customer experiences. It is the change in the way companies conduct their business. Again, the textbook example of Netflix, moving from online rental DVDs to the global streaming platform. Nowadays, even traditionally based businesses that have been operating well before the digital age are embracing digital transformation. Such example is New York Times. Digital has been killing publishing and newspapers for over a decade now. New York Times successfully implements a subscription model for their online content that allowed the company to continue to deliver the same type of high-quality journalism and content their readers trusted for over a century while avoiding dependence on advertiser’s demands.

The transformation model that Philip Morris International deploying to a smoke-free future, opened up an opportunity for embracing the digital agenda, making the biggest shift in the history of the company and tobacco industry. Digital has become a key enabler of the company’s transformation. With innovative electronic devices that work on “heat not burn” technology, it makes steps of transforming from tobacco giant to tech-driven company, thus helping the business become more competitive in the future.

The bottom line is that the adoption of digital trends is inevitable. The crisis just seemingly provided a sudden glimpse into a future world, one in which digital has become central to every interaction, forcing both, organizations and individuals, to move further up on the adoption curve almost overnight.

How digitalization is supporting the smoke free transformation of Philip Morris market in North Macedonia?

Philip Morris International is aware that our consumers and the business landscape are constantly evolving. The numbers show that N. Macedonia has digital adoption and literacy* above the global standards, thus we, at Phillip Morris, adjust the way we connect to our consumers and to our partners.

Being present online with our innovative electronic device is one of the basic things for our business. For a long period of time, local businesses were educating consumers to use their e-commerce by incentivizing online interactions. Lately, mainly impacted by pandemics, e-commerce has become a channel of convenience, hence performing on the same level as offline channels. Keeping in mind that the pandemic has changed consumer behaviors, some permanently, we work on the implementation of additional contactless services that mix the offline and online worlds making it possible to order online and to pick up the goods in the store. We are investigating innovative solutions to bring an in-store feel to the digital world via a virialized store.

For us, a customer-centric company is more than a company that offers good customer service. Providing a positive customer experience is imperative for Philip Morris International. Digital care is a key factor to achieving it. Being present on the most accepted digital communication channels and social media enables support of our users anytime. Additionally, the digital onboarding process that leads our users to a smoke-free world, is a unique experience that builds loyalty. Our digital eco-system continues to evolve further in social media, piloting with chatbot and app, further improvement in hyper care, etc.

The digital trends are also developing in the B2B world. The need for different experiences is evident. Companies have been reluctant to open up to their business partners and relied on the traditional way of engagement. If the business partner has a problem with his product, he usually has only two options: reads the manual or call his sales rep. Philip Morris puts a high focus on the digitalization of B2B, exploiting the opportunities that B2B customers are mobile, fully engaged in social media, and digital-savvy. Utilizing B2B digital application, Philip Morris is constantly delivering value through improved communications, support, and streamlining supply chain processes.

Being passionate about digital, with a focus on what the customer wants and on building relationships, gives PMI’s team-high motivation for turning the vision of a smoke-free world into reality.

What makes us stand out

We are proud to be the first tobacco company to commit to a smoke-free future. This is indeed a monumental change – one that touches every team in our company. The key to a successful transformation is an inclusive workplace that attracts and retains a diverse community of employees who are at the heart of our growth and innovation, both globally and on a local scale. While the transformation is an enormous undertaking, our company has innovation and leadership DNA and can rise up to the challenge. At PMI, we see equal pay for equal work between men and women as the baseline standard for equality at the workplace. The team at our affiliate in Macedonia is young and diverse. The average age is 34 and equal distribution between genders. Participation in every discussion or project is strongly encouraged by all, i.e. everyone no matter their position or background is invited to speak up and share their ideas on how to improve things. Creating such environment for our employees is key so that they give their best irrespective of their background, support each other and drive innovation and consumer-centricity. We believe that fostering such a culture of an inclusive and diverse workplace is crucial to deliver our some-free vision. Simply put, fairness, inclusion, and diversity are at the core of our business transformation and what makes us stand out.

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