Digital transformation, or the rethinking of business processes to help companies compete as technology evolves, continues to affect just about every industry on a global scale.
One business which has yet to be transformed, though, is the humble petrol station. While there have been slight improvements made over the years, people worldwide still fill their cars up with petrol as they have done for decades.
But at a recent Econsultancy event in Kuala Lumpur, Agile Marketing sponsored by Oracle, attendees heard that changes are afoot in the retail petrol industry. Andy Othman, Head of Marketing at Petronas Dagangan, a major petrol retailer in Malaysia, spoke about his company’s programme to digitally transform petrol stations in a fireside chat with Wendy Hogan, Customer Experience & Marketing Strategy Director, Asia, Oracle.
The discussion offered valuable insights into the future of retail, how to get started with digital transformation in large organizations, and how to keep it going.
Wendy: How did you get involved in digital transformation at Petronas?
Andy Othman: I joined Petronas [Malaysia’s government-owned oil and gas company] a year and a half ago after spending seventeen years in the US working for dot coms and digital agencies. Most recently, I was working in corporate innovation and corporate transformations.
Conglomerates, big brands and big organizations in North America market have a dilemma on how to embrace innovation. They face disruption by small companies and startups, yet struggle to change. People like me come in, hold their hand and create a blueprint for how they can move forward.
So, I came to Petronas to lead downstream transformation and innovation and now I am in the retail business, Petronas Dagangan, which operates 1,100 petrol stations across the country.
Wendy: Presumably the business is mostly offline at the moment?
Andy Othman: It is an entirely offline business including the way we communicate and how the customers interact with the brand. Malaysia petrol consumption and the associated retail experience has not evolved in the last 20 years. For some reason, innovation and experience skipped the petrol station.
Wendy: Understandably, as oil and gas is not something you are going to buy online. How do you innovate and bring a digital mindset into a traditional industry like that?
Andy Othman: As an organization, Petronas has to embrace digital because it will be disrupted in a lot of areas and the most likely area is retail as that is consumer-facing. So, the company has decided to take innovation, transformation and digital very seriously.
Over the last year, we hired people from Astra, Maybank, Airbnb and Uber to join Petronas, because part of transformation is to upskill the internal talented people and teach them to unlearn and relearn.
Our aspiration for the retail business is to become a data company which serves the population of Malaysia.”
– Andy Othman, Petronas Dagangan
We know that if we try to transform the big ship it will be very hard. So instead, we have launched internal startups. The startups do not reside at the company headquarters [Petronas Tower in Kuala Lumpur], but at a very startup-like environment at the fringe of our organisation.
The internal ventures include our mobile payment experience, our digital marketing unit and our cloud infrastructure modernisation project.
Our aspiration for the retail business is to become a data company which serves the population of Malaysia. The fuel business will become “by the way, we sell fuel”.
Even the physical look and feel of the station will slowly transform. The stations will become more modular and the content, the products, the experience at our physical retail experience will start to shift. They will be driven by the data of the people who come to that physical property – the neighborhood, the demographic, the spending habits – and we will start merging the physical and digital experience.
By March 2019, we are going to launch our marketplace, which will compete with Lazada and Shopee. Our huge unfair advantage is that we have 1,100 physical locations. Not many brands have 1,100 physical locations, even Pos Malaysia [Malaysia’s postal service] only has 800 locations.
So, the future for Petronas Dagangan is to leverage our physical “unfair advantage” with digital. This involves knowing what product or service our customer needs before they need it. Whether it’s diapers, coffee or lifestyle products, the aspiration of a retail business is to be able to provide what our customers need.
Andy Othman: We have launched our first touchpoint, our mobile payment experience. By mid-2019 we will have the infrastructure in place to bring all the relevant data up to the cloud.
Also, we have inked partnerships with Facebook, Google and Waze to layer third-party data on our data and to start serving our customers better in the sense of experience.
It’s going to be a journey; we’re not going to get it right immediately. But we are approaching this in an agile manner, which is why the transformation initiatives are done at the fringe, not at the tower.
We have a dedicated board just for innovation and transformation and every 2 weeks we given them a physical or digital release so that the stakeholders get bite-sized value and increase their appetite. To come in and ask for $200-$300 million is just crazy, so we have stage-gated our release using an agile and iterative approach.
As they see the value, scope and data points that we have curated, they greenlight more and more investment.
Wendy: So that board is from across the business?
Andy Othman: Yes, so we have people from corporate, the mothership, and others from multiple businesses at the second tier including heads of business and shared services, including technology, finance, HR. They have all embraced transformation and so while not necessarily digitally native, they understand innovation.
This is what my years of doing corporate innovation and transformation have taught me. The last thing you want to do is say “Hey, I am going to save you and transform you in a blink of an eye.” It doesn’t work that way in a corporate environment.
Three emerging opportunities for digital transformation
Wendy: Absolutely not, and a lot of people in transformation struggle with measuring and assigning value to what they are doing and what they are achieving. So, it is interesting that you educated the people who judge such things upfront on what to expect and helped them to understand the metrics that matter. Then you are being able to deliver in bite-size chunks to continue to get investment.
Andy Othman: Another thing I have learned is that it is very difficult for corporates to embrace transformation, innovation or disruption when their KPIs are the same. Because KPI drives behavior, the culture, the DNA and the psyche of the business. Okay, you announce that you want to be digital, you want to transform, but if your KPIs are the same, your way of working will stay the same.
So, we have taken an agile approach and edit KPIs in an interactive manner. Then, when the senior managers see bite-size results according to a schedule, they become more open to transformation. And, to me, that is the biggest hurdle for any corporation of our size when trying to get companies to embrace disruption or innovation.
Wendy: So, you have a really ambitious external agenda in terms of how you want to transform and how you will interact with the customer and the product that you deliver. But it sounds like you also have an ambitious internal agenda to unlock the frozen middle and get the entire organization to operate differently.
How do you balance how much time you invest in each one? How do you resource it?
Andy Othman: We are lucky because my CEO is very aggressive. He told me before I came in that he was not afraid of innovation, transformation and disruption cannibalizing the business – so I don’t need to hold anything back. It’s very refreshing when you have a leader who says that some of his people will not make it.
The process of transformation means that your legacy people need to unlearn and relearn, but not all will make it. That’s unfortunate, but it is what it is. So, we have put innovation on the fringe, but as we gain experience, we will slowly cannibalize the old business and the way we operate.
We try not to pay attention too much to ‘balance’ because we want transformation to progress organically. If we try to empathize with every little detail or take care of everybody, then we will not achieve the pace and agility that we feel is needed.
So, we let the big ship move slowly, but at the same time launch speedboats to get to our goals. Some people will get in the speedboats and some people don’t. And if the Titanic were to sink, we know the speedboats will have created exponential growth for the company.
So, the mindset of our senior management is to be brave and aggressive and this is conveyed to the leaders that carry out our programmes. Whoever cannot embrace and put them into their day-to-day work might be left behind, but it is OK.
The process of transformation means that your legacy people need to unlearn and relearn, but not all will make it.”
Wendy: One of the things Forrester talks about today is loyalty and the death of loyalty. But loyalty is about how you feel about a brand as opposed to a transactional experience. Are you thinking about what loyalty means to Petronas as you build out this strategy?
Andy Othman: I inherited Petronas’ loyalty department, but the way I think about it is that in the future you won’t have loyalty at all. Because if you deliver what the customer needs before you know they need it, you don’t need loyalty.
And, instead of loyalty, people subscribe to the experience. If you look at Amazon Prime, you pay money every month because the brand serves you so well. For example, even before you finish your detergent, Amazon prompts you and says, “Hey, I will send you detergent.” They serve you before you need something.
Our aspiration is to be able to serve you before you need something. We are now putting together the building blocks to get there and, in the future,, there will be no loyalty. So, loyalty is dead.
As for customers, they are not loyal to any brand. They are loyal to whoever gives them the right experience and the right value, the right product at the right time.
We even see this with our so-called Petronas loyalists. We did our ethnography and followed people in their daily lives. Before we started the journey, they would say “I am a diehard Petronas loyalist” – but when you get to the car, they use the first petrol [station] that they see.
Wendy: So you talked about hiring from a whole bunch of other businesses to deliver cognitive diversity into yours. The one thing you know is that everything we do today will be different tomorrow. So how do you keep up with the pace of change?
Andy Othman: Petronas used to hire or grow talent so that the boss would be the smartest person and, as you go down, the people would be less and less smart.
We changed that, and the bosses do not have to know everything. If the boss is an ‘A’, the boss needs to hire an ‘A+’. That requires for us to get new talent from the market.
But what has worked for me over the years in blending internal and external talent is to make sure that the the people I put together have chemistry. From my personal experience, I sometimes give up on experience, but I want to win on chemistry.
Because a team that is well-oiled and works well together as a team will produce far better results than a bunch of smart people, super experienced, coming together from different industries.