Leading the digital transformation journey at Pirelli
To understand how digital technology is transforming industry, consider the journey of legendary Italian tyre maker Pirelli. Since its beginnings in Milan in 1872, Pirelli has focused principally on the pursuit of mechanical grip and other physical performance measures. But that is changing. As cars become more intelligent and digitally connected, so must the tyres that keep them anchored to the road. The development of new technology, 'smart tyres', has required fundamental changes in the way the company thinks, operates and delivers to customers. The Connesso smart tyre has a sensor embedded in the tread that communicates real-time data to a smartphone app or on-board computer, with information on pressures, tread depth and temperature, and then provides alerts to the driver. The geo-sensor can even locate the nearest approved workshop for replacements or repairs.
To develop and deliver these kinds of projects, a new culture has been developed. We spoke to Pirelli’s Group Chief Information Officer, Marcelo De Santis, who shares vital perspectives for any organization on the same journey of digital transformation.
Digital strategy encompasses diverse elements including technologies, software, systems, processes, and behaviours. What are the key features of the digital strategy at Pirelli?
We are transforming a company that has traditionally been product-centric into a company that is consumer-centric, and that means a lot of change. It’s the transition from selling a tyre to selling a digitally connected tyre, a product that enables autonomous vehicles and has a data connection with consumers. As a result, the key question becomes how do you adapt your organization, your processes, your talent and the supply chain specifically to commercialize these new digital products?
It’s a completely different challenge for the company. As an example, the salesforce goes from selling tyres to selling a service, dealing with topics like data privacy. Imagine the change in the salesforce – they become more like consultants or educators in some cases, because the product they’re selling is much more complex. Not to mention that the supply chain is much more complex: a product that involves sensing software, digital applications, a kit to install sensors in vehicles: this is a completely different game that changes the company end to end.
For manufacturing and supply chain leaders not yet harnessing the power of digital innovation, how would you recommend they start?
It starts with the establishment of product teams at the beginning of the journey. To create our smart tyres, we set up a cross-functional team, very small, made up of marketing, supply chain, IT, finance and strategic suppliers.
From the beginning, they worked in a truly agile way, with close input from our consumers. That creates different ways of working in an organization that is more traditional and vertically oriented. Stressing that from the beginning was a key success factor.
In the beginning, people may not believe that this can work, so it’s important to prove it. Inaction is not an option: to continue to look at presentations and white papers is not enough. The only way to do this is like learning to ride a bicycle. You get on the bicycle, start pedalling, stumble a few times, try again. And then there will be a day where you’re not thinking about riding the bicycle. This is the same: you need to stumble a couple of times, starting small so there is not such a big business risk, and so that you can deliver everything.
That’s how we did it at Pirelli, then we added more products, more interactions. And honestly, some products actually failed, never getting past four or five iterations because when we tested the market we realised it’s not a good idea. However, you are learning new ways of working, which is the most important thing.
How will the acceleration of digital transformation change industry in the next 5-10 years?
For companies, among the emerging technologies, it’s the integration of AI and data that will have a major impact. AI is now becoming a reality rather than just a buzzword. I always quote Andrew Ng, formerly of Baidu, who says that everything that the human being can decide in three seconds or less is going to be easily automated by AI in the next couple of years.
If you look at your own company, how many activities today can be removed from our work lives? The challenge for many companies is whether they have the right data for AI, and if they even really know what data they do and don’t have.
Number one on the agenda is to get hold of your data now. Procurement teams should make sure that every time a contract around a service or asset is signed; the data produced by the service or asset is owned by their companies. You don’t know if you will need that data in the future.
You worked at Mondelez before joining Pirelli: what insights has that time in a CPG/FMCG company given you about how consumers’ lives will be changed by innovative technology?
For consumers, it’s an interesting, exciting time. In summary, you might not be the one shopping for things in future – your appliances will decide for you.
Through image recognition, your refrigerator will know exactly what kinds of products you have, the history of what you eat and when, interact with you to understand what you want in terms of quality and price, then automatically buy for you. Consumers will have more time to shop for the things they want to spend time over, but for brands, it is going to be a big challenge because you will have less time and opportunities to engage with a consumer.
In a CPG company it’s a threat, and if you’re in an advertising company it’s a double threat. The question they will be asking is: “How do you advertise to an algorithm?”
There will be headwinds in this process because of regulation and data privacy, but remember that consumers will decide what data to share, largely if there’s a value-added exchange for that data. If I get price, quality and save an hour’s shopping a week, then will I share the data for my home appliances… why not?
What are the challenges of communicating digital transformation to non-technical audiences in your organization – for example to the CEO?
It’s important to manage the cultural change. Digital transformation is not just about doing digital things, it’s about changing the way we work as an organization. I truly believe that in 5-10 years, most companies are going to have products that have a digital layer in their portfolios. In order to deliver digital products in the consumer environment, you’ll be forced to become a product development organization using those agile development teams I referred to.
So you need to start that now, even by starting small and learning through use cases, getting some wins under your belt. The talent you are looking to recruit is going to ask if you’re doing those things, otherwise they’re not going to join your company.
You need to look at other companies. There’s no way you’re going to have all the ideas, talent and manpower to do things yourself. If you do not connect, you do not looking at start-ups, you’ll fail. It’s impossible to keep up without that outside perspective.