Forget about digital transformation

We have had quite a few discussions and keynotes about digital transformation this year. At our latest year end event, Agfa’s CEO Christian Reinaudo gave us food for thought: “Why still talk about digital transformation? Everything’s digital anyhow. Call it transformation, period.”
Okay, we shouldn’t throw away all texts and talks on the subject, but Christian had a point. Digital transformation is just one part of the digitalization.

Business transformation

We all know Agfa from the old days, when it used to compete with Fuji and Kodak. The Mortsel based company was a world leader in photo film. It was a consumer business. “Our customers started to digitalize, we needed to follow and transform our Ministry of Photography”, Reinaudo says.

And so they did, but it started the digitalization process in another imaging branch: analog radiology. Most hospitals have adopted digital PACS today. With its electronic patient record, Agfa has the gate to digital healthcare, and digital imaging. Agfa was ahead of the competition and remained a leader in the sector, even if the competitors today are countless.

The Graphics division, more renowned in the printing industry, also went from producing analog offset print plates to fully digital processes. Agfa is now a world player in materials for billboard print shops.

“Our customers started to digitalize, we needed to follow and transform our Ministry of Photography”

Social and cultural transformation

But by transforming the business from analog to digital, Agfa underwent a few other transformations as well. Socially and culturally, first and foremost. “It changed our go-to-market, from channel to direct sales. Same goes for healthcare: selling the core of the hospital’s IT is another process than selling an analog radiology machine. Sales staff needed to sell hours of service instead of kilos of chemicals or square meters of film”, Reinaudo explains.

On the recruitment side as well, there was a social and cultural transformation to realize. The company needed more project managers, support officers, engineers that could drive the digitization process. Agfa now has 2,000 IT staff, 25% of which are located in Belgium.

Financial transformation

A transformation that one wouldn’t expect immediately when thinking about digitization. “Over the years, our balance sheet has been influenced by the pension liabilities that we hadn’t foreseen. We used to be a large company with a lot of pensioners. They weren’t prepaid by a fund, or underfunded. It means that we have an F1, but we’re driving on narrow roads. We must be careful and it limits us to grow fast and to transform the company further. It would be logic to split divisions healthcare and graphics, but it would imply that we need to split the liabilities as well. That’s complex.”

It means that we have an F1, but we’re driving on narrow roads.
Christian ReinaudoCEO Agfa
Early 21st century, there were a few bad habits with regard to cost spending in the company. Agfa changed those significantly. It put systems in place that track every cent that is spent in the company. “Without that, you cannot transform your company. We have cut about 200 million euros in SG&A: we went from 25 to 18% of nearly 3 billion euros in sales revenue. That is where IT plays a key and big role, enabling efficiency and productivity in the whole organization.”

Geographical transformation

Finally, Agfa is also transforming its geographical position. Not even a decade ago, 56% of the sales was realized in Europe. Now European sales accounts for 40% of the turn-over, without any recline on our home continent. The US for instance is an important emerging market for Agfa with big contracts in the digital imaging of American hospitals.

Digitization is the path we need to choose, be it drastically like Agfa or in slow-motion with a few zodiac start-ups you let get up to speed along your traditional tanker business. As CIOs, we are so close (too close?) to digital and IT, that we tend to forget that traditional businesses reinventing themselves for the next decades, need to think about much more than digital alone.

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