INTERVIEW
Innovation in Action: AkzoNobel’s Blueprint for Digital Success
With Michel Claassens – Global Head of Digital, AkzoNobel
Michel Claassens’ resume reads like a who’s who of leading Dutch brands. He has held positions at Philips, Philips Lighting, NSX, and is now the Global Head of Digital at AkzoNobel. In his current role, Claassens is responsible for exciting areas, including global digital transformation within AkzoNobel across both B2B and B2C. He emphasizes that digital transformation is not just about technology, but rather about people.
While AkzoNobel may be less familiar to those in the US, it is a highly successful global manufacturer of paints and coatings. Founded in the Netherlands in 1792, the company has a market capitalization over $11 billion and operates worldwide, though its Dutch headquarters is where this interview was recorded. AkzoNobel’s digital transformation initiatives are quite innovative, including the implementation of augmented and virtual reality technologies for training, supply chain optimization, and enhanced customer experiences. The company focuses on the customer journey as the starting point, aiming to drive improvements in customer experience as well as revenue impact. Interestingly, AkzoNobel has found that customers who engage both online and offline have the highest order values, highlighting the importance of a hybrid model. Perhaps most surprisingly, AkzoNobel is now focused on incorporating digital components and data into product innovation, including the development of “digital paint.”
Richard Owen
Well, Michel, thank you very much for joining us today and hosting us here in AkzoNobel’s headquarter office in Amsterdam. It’s a very beautiful building. If we have a chance, I might scan the camera so we can see whatever this alien plant is behind you. But thank you again. I want to start by talking about the recent Frost and Sullivan report which came out. So you guys got a lot of good visibility for this, for what you were talking about. I think augmented reality glasses was one of the things, which isn’t usually an area we hear much about. What were you guys doing with that?
Michel Claassens
There were actually two things going on in that space, but they haven’t particularly been in dedicated businesses. So we had a VR initiative in the automotive business unit really to help people train on the product and make them understand how to apply certain technologies better, which basically saved a lot of time. And the other one was more in the area of supply chain, where we also use those types of technologies to optimize processes in factories in the context of what is called a digital twin, basically where it was used to make sure that we optimize processes, shorten recovery times, throughput times, and what have you. So those were the initiatives where we where we used it. But I think there are even a couple of examples where we in addition also use this, particularly in the area of improving the customer experience. We have a mobile app for consumers where we used virtual reality technology, let’s say, for consumers to scan their rooms and apply certain colors in it, make choices and buy the products. We needed to shorten this decision time and help them make the choice. That had quite a big pickup. I think that app was downloaded more than 20 million times across the world. Quite a biggie.
Still isolated examples, I would say, but definitely something that is becoming more prominent in things that we do, making sure that everything we do contributes to a better experience for our customers.
Richard Owen
Yeah, because when I think of augmented reality, it was a big story a few years back. then the applications, I don’t think materialized as broadly as people would have hoped. Probably overhyped as a technology. But it seems to me industrial manufacturing is where a lot of these technologies do get successfully deployed. It might not be quite as sexy a story as consumer, but it’s often where the real benefits are, isn’t it?
Michel Claassens
Yeah, often what you see in those spaces, and the same actually goes for AI as well, it’s the efficiency gain where it really contributes to, rather than big revenue gains or what have you. So yeah, for sure. That’s where I also saw that the benefits were initially with those, with AR, VR, and AI also.
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Richard Owen
And you’ve been heading up the digital transformation initiative here. How do you frame that? Because I think a lot of digital transformation runs the risk of being solutions, I should say technology that is looking for solutions, right? So very vendor-driven, or we can do this, therefore you should do it. But usually that’s a disappointment. You’ve, I think, had a more pragmatic approach to this.
Michel Claassens
Yeah, we had a little bit indeed a more pragmatic approach where we said, first have a discussion with the executive committee on what the angle of digital transformation would be. Because when I just started here, it was quite difficult to get everybody on the same page. Indeed, as you mentioned, if we talked about digital transformation or digital, one board member really looked at it from a technical perspective. Another one really looked at it from an efficiency gain perspective. Then another one talked about it in terms of process improvement. So there were lot of different angles there. Long story short, the starting point was the decision to take the customer journey as the first angle, to drive digital transformation with a clear understanding that everything that we have to do to improve that customer experience is included across the whole company. So you have to imagine when I started, I started off as head of e-commerce and digital marketing, and then quickly I could explain to the board, look, these things are really connected across the total value chain of the company. You can’t isolate it only from a commercial perspective. You have to look at it holistically. Take the customer journey as the starting point. But everything we have to do internally as a company is in scope. That could mean, for example, improvements on the supply chain side if it comes down to certain things you need to have in place to drive online commerce. That could mean we have to align with product innovation if it comes down to making sure that product data is in order to publish to different platforms.
So we really, from a digital transformation perspective, look at the whole spectrum of the company very clearly geared towards improving customer experience. That also means that certain things would fall outside the scope of what we were doing. So things that do not directly touch a customer improvement or interface were excluded because, I know how silly it might sound, but I also had our head of HR knocking on my door saying I need a new HR system. I said, well, I think you do, but you know, I’m not the guy to drive that. So that’s basically where it all started.
From there, we clearly, let’s say, aligned with the business units to see where the focus was from a customer perspective, making sure that we have the customer journey really detailed out and translated to their go-to-market models that gave us a roadmap, what to do on the customer side of things. The second roadmap was really geared towards what we needed to do in the company to deliver that experience. And that’s the part that is often forgotten.
So it’s indeed often only the technology side of things. We said, look, as a company, we have to look beyond technology. Sure, it’s an important component, but we also have to look at, in case of AkzoNobel, how do we manage portfolios across different functions like digital supply chain, and IT, for example, because that’s where separate budgets are set, priorities are set, and they were misaligned. How do we align from a process perspective? How do we align from an organizational perspective and skills perspective? How do we align across, let’s say, the whole spectrum of the company in terms of data? And I’m not only talking of product data, but also color data in our case, or behavioral data. So we had a whole roadmap also geared towards improving the internal organization, and we had a roadmap geared towards improving the customer experience.
Richard Owen
That’s a massive undertaking. I mean, what you just described, you know, is such an expansive view. How do you keep that on track? I mean, because you’ve got so many different threads to that. Isn’t there a risk that it can just balloon out of control?
Michel Claassens
Yeah, there is. And the reality in Akzo in terms of process and digital maturity led to an approach where we said we have a framework that we use for our approach, but we apply it very specifically to what we call strategic sales. So for each of the eight business units, or nine at the moment, we have had conversations with the BU leader, BU leadership, and say, look, where in your business are the opportunities to drive digital growth or efficiencies. And we have identified across these nine, don’t pin me down, on the 26 strategic cells where we’re gonna apply the digital transformation first. So very much focused together with the business units instead of trying to apply everything across the whole company all at once because that, especially in a company like Akzo with the maturity it has, is not feasible. Then you blow things up and are, you know, running the risk of an unmanageable situation.
Richard Owen
Usually when I think of initiatives like this, you’re really trying to either either accomplish cost reduction or you’re trying to do something that’s significantly going to change the nature of relationship with customers. And to some extent, those tend to be the two measurable outcomes of the whole thing. Is that fair for Akzo? Was the balance here towards innovation that would grow revenues or did you balance that with cost reduction opportunities?
Michel Claassens
It’s a balanced approach and it also relates to, obviously, the focus of the business units. So I would almost say if you look at the spectrum of your stakeholders, it automatically leads to discussions with people that are looking very from a commercial perspective and talking about growth, revenue, gain, et cetera. The other stakeholders often talk about how can I, you know, use digital technologies to actually optimize the process of product innovation, manufacturing to distributor or channel, to your sales, and to your customer. That’s another access than your customer journey, So it’s almost a matrix type of spectrum that you’re looking at where we try to balance things out and put them into the reality of budget and resources because that’s a fair thing that always comes to play. But in the end, everything we do rolls up into those two KPIs, either revenue gain or cost efficiency for reduction.
Richard Owen
And it tends to be a challenge because revenue gain is hard to quantify, right? And we’re always very skeptical with revenue gain metrics, right? You heavily discount cost reduction. Pretty well understood. So there tends to be a bias towards focusing on cost reduction because you can quantify that much easier. Revenue is much more speculative so you have to think quite differently about how you’re going to potentially ripple through into revenue benefits. It’s so much harder.
Michel Claassens
It’s harder especially when it’s not 100 % clear if the revenue that you gain through digital channels is shift from traditional to a new channel or incremental. So we are still, by the way, putting a lot of effort in making that clear. On the other end, my position also was towards the executive committee. Look, when we started this journey, the online revenue, the revenue through digital channels was quite low. There was a couple of million. At the moment, I can’t name the exact figure, but it increased by, I think, more than 400%. Something like that, it indicates a shift in customer behavior that you can’t ignore. So all of a sudden, because of this fact, the attention is there. And sure, we want to optimize that to really improve that. There are incremental bits in it. But for sure, compared to a couple of years ago, the importance of having an online revenue channel as a company is very important.
Richard Owen
It’s interesting to say that, so when we built the online revenue channel at Dell Computer when I was there, that was in the 1990s, and we had a goal of moving 50 % of our business online over the space of about six years, which we accomplished. The surprise in some ways wasn’t so much that customers went online, but it was the other benefits associated with that. So customers who purchased online interacted very differently with the company in terms of how they bought, what they bought, how they sought support. In some ways, once they’d gone digital, they worked with the company in very different ways. Are you starting to find that now that you’ve ramped your e-commerce side? Is that sort of percolating through into other aspects of the way customers interact?
Michel Claassens
Yeah, absolutely. And what we tested out, especially in the UK, is that we wanted to see if there was a difference in customer value and the order value per customer of customers that ordered offline, that ordered online, or were engaging in both channels. In the long story short, we for a fact could prove that people that were engaging both on and offline had the highest order share in that sense. So we are putting a lot of effort to bring existing customers online.
Richard Owen
So this was the hybrid customers. They worked in both models. And did they outperform customers who were purely digital, purely offline, this hybrid group outperformed?
Michel Claassens
Yeah, the hybrid group outperformed. That’s where a lot of effort currently is going into, to bring current customers that are not online online and maintain that relationship and make hybrid customers of them to grow, let’s say, the revenue share.
Richard Owen
That’s a pretty consistent finding from a lot of companies that it’s this combined model where customers do a combination of online and a combination of digital and non-digital interactions and they seem to be the highest margin customers, they seem to be the ones that become most efficient to serve. And so it’s interesting that that’s playing out in Akzo as well. Do you see significant differences geographically when you look around the world?
Michel Claassens
Yeah, in terms of behavior, you mean? Yeah, China is always very specific. I think that that goes for most industries. What’s going on there is specific because of the landscape, digital landscape that you have with three, four big players in those networks, everything happens. It goes very fast. So you see a lot of things quite differently managed versus the rest of the world. What we see is that also even within Europe, there is quite a difference in digital maturity.
There are a couple of countries standing out. But in the majority, let’s say, we still see that there is still a lot to gain. And especially in the southern regions of Europe, we still have to put a lot of effort in. I think there’s quite some opportunity there as well. There are definitely, in terms of maturity, differences across the globe that you need to facilitate. That also means that you can’t use a ‘one size fits all’ approach for the company. It must be very focused. Hence also the choice to first direct to really strategic sales where we think we can make the difference and from their scale where we see the opportunity not only from a customer behavior point of view but also from a company readiness point of view because that’s the other side of the equation obviously.
Richard Owen
And you mentioned earlier the whole aspect of employees and how you got the internal organization to think differently about this, because I think that’s often overlooked. You know, there’s a tendency to think about all this as being externally facing, but often the challenges companies run into is bringing those digital tools into the hands of the workforce that may not be comfortable with them or certainly are used to doing business a different way. So your experience in bringing it into the company, how’s that been?
Michel Claassens
It has been a challenge. It has been quite a challenge. It has been a challenge specifically because they don’t expect me to talk about it. So I’m the digital guy and the first thing they think about, that’s the guy that’s going to bring new tools. And most of the time I tend to very quickly skip the technology part because in my opinion that’s the least exciting or difficult part of what I need to do. But changing the organization, making sure that people understand the added value of digital opportunities and know how to use this part. So the concept that we introduced is what we call, and it’s an abbreviation, SB. So wherever it goes, whether it’s about initiative like e-commerce or lead management or mobile or artificial intelligence, we always look at these areas in terms of strategy, yes, build, that’s where the technology comes into embed in the organization, activate, so making sure that they know how to use and are supported and measure the impact that we foresaw or foresee or have foreseen when we build it. So we built little suitcases where all these elements are in, which translated back into the structure of my team. So I had a strategic part of the team, the build team, a small team that looked at embeds and then we talked about things like training.
Every time you deploy something, making sure that the skillset in the BUs is becoming up to par, that they understand it. And also making sure that the organizational setup around it is in place. But this last bit is quite challenging to get that really seen as an integral part of things we need to do. But in my mind, it’s where the real change happens. The whole people and organization bit is the key to success.
Richard Owen
Yeah, the key to success and probably the biggest hurdle that most people have to overcome at some level. You know, I think any form of change in workflow or process is difficult. But data-orientated decision-making seems to be a particularly hard thing because you’ve got to, you know, I would imagine your industry, because the company’s been around a long time. How old is Akzo now? Longer than many of us care to remember, right? That’s the simple answer. And so, with a business that’s been around that long industrial, you know, you’ve still got an era of team members who are used to doing business, you know, in a very traditional style and being successful with that model. And it’s a big shift to start to look at patterns of data and information and to try and change people’s perspective. There’s a certain amount of skepticism.
And there’s a lot of tough go-kill decision points in an AI project, obviously, it’s not just an automatic goal from the get go. You you start in and you may find out bad things, partway along and have to pull the plug on it.
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Yeah, there’s skepticism and there are a couple of elements to it that form a challenge in actionable data. So you have to imagine that eight years back, Akzo was far more a decentralized managed company where each business could basically operate in their own way. That included things around how they handled the data associated with the business. At the moment that you become more digital, it also requires a more holistic approach in terms of your data architecture, which puts different requirements on your organization and your processes to be able to become effective. Well, that drives on the one hand, an internal discussion of control, where certain businesses felt, you know, a loss of control because you wanted to regulate certain things around data more centrally because of efficiency gain, et cetera.
And on the other end, to have the opportunity to connect certain types of data more efficiently to get insights that can help you improve your product innovation. Take for example the information we got from digital touch points that indicate certain color preferences or product preferences across the board that can on the one hand, let’s say drive and be used as input for your product innovation side of things. On the other hand, it helps you to understand the interest of your customer better and predict it to drive cross and upsell and incremental growth. So that whole data game is becoming more apparent and how to deal with it is different in a digital age than before. And in AkzoNobel, the first challenge was to, let’s say, have the discussion, make clear what the advantages are instead of trying to control things or position it as more central control, but really from a viewpoint to help the businesses instead of taking control away.
And then you have to go into the more technical side of things of architecture and your landscape alignment, et cetera, et cetera. And that’s where in the first few years that I was on board, we spent a lot of time making sure that we cleaned up the technical landscape, that we have a sound architecture that can help in the end to play the smart data game.
Are we there yet? Will we ever be finished? Probably not.
Richard Owen
I was going to say, I’d be very impressed if you said you were. Yeah, it feels like a never ending journey. And realistically, it will be, right? I think that no matter how much progress you make, it will never end. It will never end. When you think about the future, though, if you were to imagine the company three, four, five years down the road, how do you see it? I mean, is this a business that, you know, evolves from its traditional way of thinking to being fundamentally different in the way it interacts with customers, the way it interacts with employees? Is that achievable? And if so, I mean, how long do you think it would take?
Michel Claassens
That’s a very interesting question. Yes, I think it will change dramatically or it needs to change dramatically. The challenge is that we are in a pretty traditional industry of selling paint. On the other hand, if you look at the innovation side of our industry, more and more product innovations have a digital component in it. You see paint that can transport electricity, for example, with all applications in it. You see certain coatings that can capture data in pipelines to see what goes through it and how to optimize it, or clean ships or whatever. So more and more innovation is coming from a digital angle, which will mean this industry will change from a purely ‘paint in buckets’ type of industry to an industry that will be or has to be focused far more on a rich product proposition for the customer that includes also data and digital components That for sure will have an impact that will probably lead to more service oriented propositions to the customer, rather than product.
Richard Owen
Yeah. And that’s really what changes, right? If it shifts, because often the margin shifts to service, the product becomes brutally competitive. And I was talking with a large European elevator manufacturer. You probably imagine who, and they describe themselves as first of all, an Internet of Things company. In some ways, manufacturing elevators was less lucrative than servicing them. The service market’s extremely competitive. And then it becomes digital products because you want the elevators or the escalators to notify you in advance if there’s a mechanical risk, right? So that shift means the competence in the company shifts away from traditional mechanical engineering to data science and digital technologies, which is a whole new world in terms of skill sets and culture. Just in the news this morning, I think there was a piece about Volkswagen doing a deal with Rivian for software technology, and they’ve essentially disbanded their entire internal software team, which came as a shock to that team apparently who didn’t see it coming. But this notion of software as a competence in automobile manufacturing and so software as a competence in the paint industry, that’s got to be a completely different proposition for the company.
Michel Claassens
It’s different proposition, but you see it happening. You see certain semiconductor companies already moving into this space as well, with completely different propositions that for example can detect water damage in buildings. One of the big problems in large buildings if something leaks and you come to your office on Monday and it has been leaking all weekend you have a lot of damage.
So there is already solutions there from a coatings perspective to detect it. So it’s for sure it’s shifting. How fast it will go, I find difficult to predict because of the traditional nature of the industry. I don’t think it will completely change in the next five years in all honesty. But I do think there will be significant change.
Richard Owen
Well, I’ve always thought in technology, we get the direction right but the timing wrong. If you’d have asked me in the 90s about e-commerce, I would have said, well, 10 years from now, we’d have destroyed retail. Well, that didn’t happen. But the long-term trajectory was correct. It’s just that it happens a lot slower than we realized because organizations take time to change.
Michel Claassens
And for me, the interesting thing of working at Akzo in that sense is that the dynamics which we are now currently talking about have happened in industries I previously worked in. In Philips, if you look at the consumer industry, the same thing happened. The pros became more digitally and data driven in the personal health area. Same in the lighting industry with propositions of connected lighting and lighting as a service. Similar type of dynamic.
Richard Owen
Yeah, and clearly, Philips is just by geographic proximity, it’s got to be a business you guys know very well, and look at their evolution as a company. As you said, lighting has gone from being a very basic product to a very complex and sophisticated product. So very interesting. Well, Michel, thank you very much for taking the time to talk to me today. I think it’s a fascinating story. And I think it’s particularly relevant for an awful lot of companies out there that are in the industrial manufacturing sector that in some ways always feel a bit more left behind by digital technology because we hear about Silicon Valley startups every day, but most of the economy looks more like businesses like Akzo. And congratulations on the progress to date and best wishes for the future. Thank you very much.
Michel Claassens
Thank you for having me.
And for me, the interesting thing of working at Akzo in that sense is that the dynamics which we are now currently talking about have happened in industries I previously worked in.
ABOUT THE CX ICONOCLASTS
Michel Claassens is the Global Head of Digital at AkzoNobel, a leading global paints and coatings company. With a strong background in digital transformation and marketing, Michel has been instrumental in driving AkzoNobel’s digital initiatives and strategies
Before joining AkzoNobel, Michel held significant roles at Signify (formerly Philips Lighting), where he served as Vice President of Digital Marketing and E-commerce. His expertise in digital solutions and e-commerce has been pivotal in enhancing the company’s online presence and customer engagement.
At AkzoNobel, Michel leads the Global Digital Center of Excellence, managing projects that intersect technology and business impact. He has played a key role in harmonizing the company’s MarTech landscape and driving its global digital and e-commerce strategy. Michel’s work is characterized by a deep understanding of both the technological and business aspects of digital transformation, making him a valuable asset to AkzoNobel and a leader in the field of digital marketing.
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