Leading through Digital Disruption

Leading through Digital Disruption: A Case Study of InBev, UK

Table of Contents

Executive Summary——————————————-3

1.0 Introduction————————————————3

1.1 The Case for Change————————————-4

1.2. Capture Insights——————————————6

1.3 Make Fast Decisions————————————-7

1.4 Acquire and Engage Talents—————————–9

1.5 Create a Digital Ready Culture————————-11

1.6 Steer Collaboration————————————–12

1.7 Selection of Leaders————————————-13

Conclusion—————————————————-15

References—————————————————- 15

EXECUTIVE SUMMARY

AB   InBev   is   a   UK-based brewing company. The brewer was established in 2004 after a successful merger between Interbrew (Belgium) and AmBev (Brazil). With strong presence in over 30 countries and consumers in more than 130 countries, AB InBev integrates the cloud software and Artificial Intelligence (AI) to continually transform its digital system and maintain market visibility at the global stage. This study analyses challenges to AB InBev’s digital transformation efforts. The purpose is to gain insight into the brewer’s business environment and proffer workable management strategies and/or digitalization ideas capable of enhancing performance of the core areas of disruptive innovation—people, business and technology (AlMulhim, 2021, p.1365). Using findings from this study, the researcher will analyse how technological advancement can be leveraged to digitalize businesses, improve brand value, and expand market segments for profitability and sustainability (Magnusson, 2020, p.335).

1. INTRODUCTION

Diffusion of advanced technologies in global business has radically transformed value creation. The incorporation of digital technologies, especially in the manufacturing industry, has also enhanced work process and productivity levels—as well as strengthened relationship with customers (Sepasgozar & Loosemore, 2017, p.1218). Digital transformation in the business domain therefore encourages paradigm shift from a culture=oriented concept to an innovative approach that questions traditional ways of doing business.  On this premise, digital disruption emphasizes the need for business leaders (in both large and small corporations) to learn how to accept failure and as motivation to embrace creative thinking and use of evidence-based research to improve competitive advantage and achieve sustainable profits for their organizations (Margiono., 2021, p.319).

The term ‘digital disruption’ is often used in the business domain. It can be heard in almost every global management discussion as a strategy for achieving business goals in the fast-changing digital age. The problem is: many business leaders neither understand what digital disruption means nor have robust implementation strategies. In most cases, business managers have no ideas on what aspect of their corporate plan should be altered—and whether there is need for change management. Digital disruption refers to changes experienced from launching new digital technologies, services, and business models that transform the value of existing goods and/or services within an industry. This study examines AB InBev, UK to identify how organizations can achieve business goals through digital disruption.

1.1 THE CASE FOR CHANGE

The adverse effect of COVID-19 pandemic on global business was enormous. AB InBev’s 2020 Annual Report shows that disruptions in volume of sales and total earnings have spurred global market leaders to think creatively in order to transform business outlook. Digital disruption at AB InBev therefore provides a leeway to revitalize business by aligning process (business activities) with ever-changing customer needs. But despite AB InBev’s integration of innovation to fast-track digital transformation, COVID-19 pandemic presents a formidable challenge to supply chain (Tarofder et al, 2013, p. 450). The company incurred huge losses during the lockdown as restricted movement affected delivery of non-essential products. The world’s largest brewer declared a thirty-two percent (32%) decline in sales (April 2020) around England. In March 2020, AB InBev sales in China recorded a significant drop (46.5%) although the loss reduced to 17% in April, 2020 (Rachel., 2020).

Using business insights from China and South Korea, AB InBev developed and shared best practices with stakeholders across its global supply chain to maximize economies of scale, capacities and resources (Tarofder et al, 2013, p.436). The investment in social capital involved maximization of technology (including e-commerce platforms and B2B sales) to connect with consumers/customers. To achieve this business objective the company converted operations to produce and donate millions of bottle water and hand sanitizer to support the fight against COVID-19. The pandemic was therefore a key opportunity to improve brand image through corporate social responsibility (CSR) (Bharadwaj et al, 2013, p.477).

A second problem AB InBev faced during the COVID-19 era was slow experimentation of its CSR efforts. A study conducted by the Harvard Business Review emphasized that one of the major setbacks to digital transformation is lack of human/material resources (capacity) to conduct experiments rapidly. This is more so because digital innovation in the business domain has taken a fast-paced motion that requires creative ideas and managerial dynamism to sustain competitiveness—some of the reasons why Ab InBev needs change management (Magnusson, 2020, p.335). Additionally, AB InBev business operations indicate inadequate use of internet technology (IT) and poor networking strategies prior to the pandemic (Rachel., 2020). The UK-based company however relies on digital disruption to continually satisfy consumer needs and expand customer base for sustained global dominance in the manufacturing industry. Basically, the popular brewer aims at achieving zero incidents in its supply chain within the UK, where there is technology designed to track, protect and manage safe comportments. Although drivers are trained to maintain speed limits, obey traffic rules and avoid heavy breakage, AB InBev delivery vehicles are equipped with telemetric technology (such as safety alarms, dashcams and seatbelt sensors) to identify dangerous routes and any unprofessional behaviours from employees (Tarofder et al, 2013, p.439).

1.2 CAPTURE INSIGHTS

According to its official 2021 publication, AB InBev integrates advanced and emerging technology to engage employees, investors, communities and customers—especially beer lovers around the word—to drive business growth. Through digital transformation, the company constantly scales its existing capabilities in AI, automation, business data and analytics to explore new technologies (such as blockchain and VR) used to gather, analyse and use information required to improve consumer/customer experience (Bharadwaj et al, 2013, p.477). Digital disruption (innovation) has therefore enabled establishment of research labs and technology centres around the world—an aggressive business approach which led to the discovery of new beer categories (Margiono., 2021, p.319).

Beer Garage is AB InBev’s tech innovation lab. Located in Silicon Valley’s business-friendly environment, Beer Garage has a team of professionals in Cybersecurity, Innovation and Global Enterprise Architecture who drive competitive advantage by exploring, implementing and scaling industry trends and new business strategies—including opportunities provided by networking with global business leaders, and integration of Fintech, Internet of Things (IoT) etc. For example, AB InBev adapts creative technologies to optimize performance of its marketing and distribution channels (Magnusson, 2020, p.335). Thus, the company utilizes digitalization to identify production and marketing ideas that enhance value creation, promote business growth, and help customers increase earnings. Beer Garage also encourages creative thinking among employees by making workplaces more appealing, friendly and conducive in ways that enable cooperation and information/knowledge sharing, as well as focus on the Dream Big (Lichtenthaler, 2019, p.42).

1.3 MAKE FAST DECISIONS

The COVID-19 lockdown created sudden shortage of goods and services as businesses shut down to prevent spread of the deadly virus. But demand was increasingly high and organizational leaders struggled to sustain sales profits. However, strict COVID-19 guidelines which emphasized social distancing further disrupted sales, thus, necessitating a shift to e-commerce and rise in logistics (courier) mainly because consumers cared more for their health and safety. These threats to business survival required AB InBev to act quickly. In response, the company had to choose between two data-based business approaches:

• All-inclusive decision-making

This business strategy emphasizes proper use of human capacity. Ab InBev had an option to focus on employees as the key drivers of growth. This strategy requires organizational leaders to effectively manage, monitor, and boost employee performance by involving them in the decision-making process (AlMulhim, 2021, p.1365). The all-inclusive approach therefore encourages maximization of suppliers’ proximity to the wholesalers, retailers and consumers which allows access to useful information about customer preferences and business barriers in different market segments. In this way, the company can rely on humans rather than technology to make more humane, consumer-oriented business decisions (Lichtenthaler, 2019, p.42).  

• Data-driven decision-making

Alternatively, AB InBev could explore uncharted market segments with internet technology- and data-driven ideas. This management approach requires optimal use of the cloud software and AI to gather and analyse strengths, weaknesses, threats and opportunities (SWOT) within the business environment in order to make evidence-based decisions that are considered more effective, reliable and productive in highly disruptive times. The data-driven approach enables organizational leaders to collate information from interactions with clients as well as employee activities by monitoring behaviours (Margiono., 2021, p.319).

Proposed Strategy Road Map (SRM): AB InBev utilized both the all-inclusive and data-driven approaches to global business management. The company did not downsize its workforce during the lockdown as many competitors did to reduce losses. Instead, employees worked remotely while business managers constantly analysed the global picture. Using data analytics and location-specific information, AB InBev segmented its global market using three factors:

• the stage of the spread of COVID-19
• the maturity feature of the market (such as the on- and off-premise channel mix) and
• the extent of COVID-19 guidelines on social distancing in different markets.

Data collected on the aforementioned features were used to categorize markets into four segments vis-a-vis:

• Recovering markets (e.g. China and South Korea) which showed signs of early recovery). AB InBev reported steady openings and improved business as wholesalers resumed operations though at lower-demand levels.
• Less-restrictive developing markets like Brazil and Columbia that observed strict social distancing. The company allowed on-premise transactions in predominantly closed stores to help traditional trade partners sustain business during COVID-19.
• More-restrictive developing markets like Peru, Mexico and South Africa where brewery operation was highly restricted. The brewer concentrated on CSR activities to support governments in the fight against the pandemic pending when business operations would regain normalcy.
• Less-restrictive developed markets like Canada, U.S., and many countries in Western Europe with sustained off-premise sales via online transactions and logistics services. The on-premise channel remained closed due to strict social distancing.

AB InBev also increased investment in CSR activities across the world. Using the data-driven approach, the brewer identified its SWOT and maximized the knowledge to establish mutually-beneficial relationships with governments, suppliers and logistics companies to drive growth. These integrated strategies remarkable business transformations that enabled AB InBev to lead through digital disruption.

4. ACQUIRE AND ENGAGE TALENTS

Recruitment is one of the most technologically-disruptive industries. To attract the best talent possible, AB InBev recruiters use different new digital tools and technological applications in the hiring process such as (a) HackerRank which allows recruiters to use next-generation intelligent tools for assessing candidates (specialized in engineering and software) in real-time (b) Pymetrics which enables recruiters to assess candidates’ soft skills, resumes and intelligence via AI-enhanced computer games that are quick, fun and interactive (c) HireVue which allows recruiters to stream, assess and screen candidates’ video interviews with AI-powered systems and neuroscience technology. AB InBev’s recruitment tools allow candidates the flexibility of taking tests/interviews at a convenient time. While some businesses still lag in the recruitment curve, over 45% of large companies and 51% SMEs are increasing expenditure in recruitment tools/technology (Margiono., 2021, p.319; Schlegel & Kraus, 2021, p.12).

AB InBev also uses the Electronic System for Travel Authorization (ESTA) to assess candidates’ data in the Visa Waiver Program (VWP), which is further used to analyse their eligibility to travel/work in the U.S. The European Union (EU) In 2018 approved use of similar system—the European Travel Information and Authorisation System (ETIAS), which is set to become operational in 2022. When AB InBev recruiters want to import candidates’ data summaries from different job applications or to streamline recruitment in the visa processing department, recruitment tools/technologies prove quite useful.

How AB InBev engages talents

Workplace Social Engagement: AB InBev strengthens social relationships in the workplace through user-friendly and highly-interactive technologies, including adequate welfare packages that increase social engagement, job satisfaction, and productivity (Hirsch, 2020, p.79).

Workforce Planning: Workplace social engagement (such as inter-departmental collaboration) and effective planning also improve brand image and employees’ commitment to achieving organizational goals. Thus, AB InBev managers encourage ‘happy workers’ to play active roles in the decision-making process in addition to making suggestions and sharing opinions. Information from employees provide basis for effective business decisions that attract and retain customers (Lichtenthaler, 2019, p.42).

Unity of Purpose: AB InBev maximizes the Intranet and internal networking systems to link workers in various departments and locations thereby infusing efficiency in project management, budgets and daily business activities (Bharadwaj et al, 2013, p.477).

5. CREATE A DIGITAL READY CULTURE

To   achieve   competitiveness, profitability and sustainability, modern-day organizations need digital   transformation and innovative management approaches. But the role of organizational culture (i.e. attitude, behaviours and beliefs held by employees) as a catalyst for digital disruption in global markets should not be ignored.  AB InBev fosters a digital-ready culture through:

• Opinion leaders: Opinion leaders at AB InBev do not aim at changing employees’ thought pattern or work process. Instead, the focus is on identifying the most socially-linked individuals (the influencers) and involving them during strategy sessions to create initiatives and adopt innovative business ideas. Opinion leaders should also emphasize on cultural ability—not only technical competence—as a way of building relationship internally and with customers (Lichtenthaler, 2019, p.42).
• Investment in skills acquisition: Although digital disruption increases employee performance, most organizations sustain productivity and profitability by increasing investment in human capital development (AlMulhim, 2021, p.1365). Therefore, AB InBev can create a digital-ready and innovative culture by organizing regular training/enlightenment programs, offering scholarships, aligning organizational culture with objectives, and maximising emotional intelligence. Employees also need good interpersonal relationship skills to adapt easily in multicultural settings (Margiono., 2021, p.319).
• Choice of business model: The choice of management approach/strategy enhances cooperation as well as influences result of experimentation. Organizational leaders should therefore adapt innovative business models that integrates trends in advanced technology and new business management ideas to create sustainable value for stakeholders (Hirsch, 2020, p.79).
• Embrace an open culture: Effective communication is a necessary skill for organizational leaders. AB InBev managers therefore have a responsibility to provide feedback from SWOT analysis of the business environment—and ensure that employees understand the reason for diffusing new technologies/ideas (Sepasgozar & Loosemore, 2017, p. 1207). Thus, effective communication improves understanding and strengthens support for organizational goals (Lichtenthaler, 2019, p.42).

6. STEER COLLABORATION

Physical communication between managers and subordinates is more effective than automated interactions. To successfully integrate new technologies in business, organizational leaders need to cooperate with employees and stakeholders (customers, investors, shareholders etc) whose roles in creating strong, efficient working conditions cannot be underestimated. On this premise, AB InBev leaders should:

• Utilize enterprise resource planning (ERP): This all-in-one business management model provides a platform to efficiently manage human resources, budget/finance, customers, vendors/suppliers and inventory. The ERP framework also combines sales   and demand analytics to forecast how demand and supply can affect future performance. ERP therefore improves planning and execution of projects (Sepasgozar & Loosemore, 2017, p.1211).
• Brand marketing: AB InBev’s products should look as good as its public image in order to increase appeal to potential customers. The company should therefore hire experienced-and-multifunctional marketers, especially those with skills in graphic design software (such as Canva, Crello and Easil) to redesign and manage social media platforms, websites, brand logo, adverts etc (Margiono., 2021, p.319).
• Supply chain management: To ensure that products are constantly available in consumer locations, AB InBev should hire experienced distributors who can easily penetrate existing markets as well as identify new channels (retail outlets) in the supply chain (e.g. restaurants and pubs). The ERP software is also useful in the beer distribution business because it enhances planning (customer/resource management) and reduces delay in supply (Tarofder et al, 2013, p.445).

7. SELECTION OF LEADERS

Organizational leadership plays the crucial role of managing people, process and technology. Thus, digital leaders have certain attributes/characteristics that improve competitiveness and profitability, and they are as follows:

• Humility: Successful digital leaders should feel comfortable to admit when they don’t have the right answers/solutions to organizational problems (Bharadwaj et al, 2013, p.477). They must show humility and willingness to seek different opinions/ideas internally or from outside the organization—especially in this digital age led by IoT (such as social media platforms and search engines). Leaders should therefore understand that employees can easily gain access to information within a business and may actually have deeper and specific knowledge of the subject than those leading them. Thus, leaders who encourage and develop such employees/teams can substitute for incompetence at the managerial level – provided members of top management are humble enough to cede ground staff (Lichtenthaler, 2019, p.42).
• Support creativity/innovation: Open-minded, visionary and result-oriented digital leaders provide conducive working environments that inspire employees to think creatively. Contributions from employees, customers and other stakeholders are also given adequate consideration while formulating/implementing policies that influence organizational performance (Lichtenthaler, 2019, p.42).
• Take ‘wise’ risks: Innovation (digital disruption) in organizations often breeds resistance. But digital leaders don’t fear failure because they know that technology diffusion is a ‘necessary evil’ for achieving growth in the digital age (Sepasgozar & Loosemore, 2017, p.1215). Therefore, ‘first movers’ for adopting new technologies are usually successful digital leaders who understand the opportunities and risks of embracing disruptive innovation (Magnusson, 2020, p.335; Margiono., 2021, p.319).
• Inspire people: Successful digital leaders are also charismatic, focused and empathic. They promote cooperation and use emotional intelligence to understand, connect and lead others in the right direction thereby creating value for the organization as well as providing team- and individual-centred motivation/fulfilment that increases employee commitment and performance (Lichtenthaler, 2019, p.42).

CONCLUSION

Every modern-day organization should embrace digital   transformation as one of the proven strategies to achieving competitive advantage and sustainable growth. Therefore, the Human Resource (HR) department should always hire experts and trust in their abilities to take strategic decisions. It is also important that leaders should be open-minded, dynamic and ready to embrace creative ideas and innovation in a fast-paced and complex business environment—otherwise the capacity to maximize opportunities from digital disruption would be restricted (Magnusson, 2020, p.335). Another core leadership competency is to have a clear vision and be able to articulate it well before, during and after integrating new technology or changing a business model. Leaders should also engage with stakeholders (customers, partners, suppliers, employees, shareholders) through responsive feedback channels and use reliable information (or ideas) to explore new opportunities in different domains (Lichtenthaler, 2019, p.42).

REFERENCES

AB InBev (2020). Annual Report. Available Online at: https://www.ab-inbev.com/content/dam/abinbev/news-media/press-releases/2021/02/AB-INBEV_AR%202020-EN.pdf

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