Why is Henkel inclined to spend $300m on technology every year?

TECHNOLOGY is critical to businesses — no matter who they are. As a result, carving out millions from their annual budgets to invest in helping the organization build its digital capabilities.

Most recently, Henkel’s annual report emphasized the fact that it has made a significant investment in digital transformation projects last year and will continue to do so for the next few years.

“To capture additional growth opportunities, especially in our consumer businesses, and further accelerate the digital transformation of our company, we announced at the beginning of 2019 that we will step up investments by around EUR 300 million (US$336 million) annually from 2019 onward.”

Two-thirds of this amount will be used to strengthen Henkel’s brands, technologies, and innovations, while one third will additionally fund the digital transformation across the entire company.

The company believes that investing in digital is a critical part of its long-term strategy to generate sustainable and profitable growth.

“It is our ambition to become even more customer-focused, more innovative, more agile, and fully digitalized in our internal processes and customer-facing activities.”

Digital transformation takes careful planning shows Henkel

While Henkel is definitely ready to put its money where its mouth is when it comes to digital transformation, various sections of the company’s annual report shows that the company that employs more than 50,000 people globally has a strategy in place to get the most out of its investments.

“We set up a Digital Advisory Board with high-caliber industry experts to advise the Management Board on the digital transformation process.

“We also established a digital mentorship network of around 150 external mentors that include founders, digital experts, and thought leaders, who are exclusively accessible to Henkel employees to provide insight and advice on digital projects and initiatives.”

The company also engages in a broad range of internal and external activities to further advance its digital capabilities and upskill its employees. We launched, for example, a tailormade self-assessment tool for individual employees and teams to evaluate their level of digital know-how and identify specific training opportunities.

“In this transformation process, our people are key. We want to ensure that they have the digital skills and knowledge that is needed – now and in the future,” Henkel’s Corporate Senior Vice President of Global HR Sylvie Nicol told local media recently.

Technology is working wonders for Henkel’s supply chain

Henkel reported that digital sales at the group level increased organically with double-digit growth rates as a direct result of the company’s renewed focus on technology.

However, behind the scenes, the company’s supply chain is seeing great results from new technology projects.

“We invested further in our production facilities to leverage the potential of Industry 4.0. We now record more than 1 billion data points with networked sensors in our supply chain every day. This enables us to optimize control of our production sites and processes, with higher quality, improved efficiency, and greater sustainability.”

The company also revealed that it was able to increase the efficiency of its purchasing activities by further standardizing, automating, and centralizing its procurement processes.

“In addition to making use of eSourcing tools to support our purchasing operations, we have pooled large portions of our purchasing administration activities – such as order and invoice processing, price data maintenance and reporting activities – within our Shared Service Centers.”

The company seems to be very aggressively driving the digitization of its purchasing activities.

We are constantly optimizing collaboration with our strategic suppliers through our digital communication platforms and increasing transparency along the value chain through new digital applications.

The company is increasingly using new technologies – such as robotics and artificial intelligence – to further improve its processes.

In fact, the company boasts of its continued efforts to integrate its production, logistics and purchasing activities across all business units in one integrated Global Supply Chain organization managed from its head office in Amsterdam and from a branch office in Singapore.

Marketing always benefits when companies go digital

Henkel’s annual report suggests that digitalization is an issue of key importance in the company’s marketing processes, as reflected in the ongoing implementation of digital transformation measures in the business unit.

“One example of this is our data-driven marketing that enables us to identify consumer trends more efficiently and to align our media campaigns ever more closely to specific consumer groups.

“In harnessing new technologies such as the Internet of Things, we are driving the further development of our brands in the digital environment and adding value for our consumers.”

The company points out that in the case of consumer marketing, advancing digitalization alongside classic advertising and point-of-sale activities enables a significant increase in media efficiency.

The company says it is creating personalized 1:1 experiences to target the right consumer group with the right message in the right environment, while also accelerating efficient re-targeting.

From the looks of it, Henkel is quite invested in driving growth by using digital technologies across its business.

“Accelerating digitalization helps us to successfully grow our business, strengthen the relationships with our customers and consumers, optimize our processes and transform the entire company.

“We are implementing a range of initiatives to drive our digital business, leverage Industry 4.0, and eTransform the organization,” Henkel summarized.

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