Fitness First’s CIO and the Best Explanation of Digital Transformation You’ll Ever Hear
“Digital is all about simplicity,” explains Ed Hutt, Group CIO, at Fitness First. “People used to do things in a really complicated way.” But with the rise of powerful consumer electronics business processes and IT systems no longer need to be either so expensive or so convoluted. Of course, getting to simple can be quite complicated.
In this interview, Hutt discusses Fitness First’s digital transformation, talks about what digital really means and explains why he always looks to give a ‘down payment’ in any transformation program that he runs.
PEX Network: Fitness First is undergoing a massive digital transformation program. What exactly are you doing?
Ed Hutt: The fitness industry itself is undergoing a massive transformation due to both overcapacity and increased demand. So Fitness First is undergoing a large transformation in response to that. There also happens to be a digital transformation taking place and this is driven by the systems that I inherited a couple of years ago. The organization has had these systems for some time and has invested quite heavily in them but they were probably no longer fit for purpose in the digital age.
Digital really only started around 2008 with the introduction of consumer electronics devices. These devices allowed a much greater degree of interaction with the customer and a greater degree of cost reduction internally because you no longer needed dedicated devices to do certain tasks, you could just do it on an iPad. So six or seven years ago if you got onto an aeroplane, all of the pilot's navigation systems would be aviation specific with the massive price tag associated with it whereas today a lot of the 'flightbag' navigation systems in aviation are based on apps that go on an iPad.
Similarly, in the IT world in the past you had to go and buy personal devices. Now you are using consumer electronics. And the question is, to what extent can you drive technology into these devices? For our customers, we can interact with them better if we give them apps, access to our systems, access to us via web browsers, apps, the ability to interact with us, the ability to record their training plans, to plan their own training, to self serve, to join online, to serve online, and ultimately to leave online as well. So we’ve reduced the amount of unnecessary interaction with people so that the interactions that do happen then become more valuable.
For instance, I am going to sell you an upgraded membership program and as a result of that, that brings value to the company.Or I’m going to talk you out of going to a competitor and talk you into staying with us because we’ve got a different proposition. Those are the valuable interactions rather than an interaction that says I come in, I stand in a queue for ten minutes, it takes ten minutes for me to join, you then make me wait ten minutes while you put all of the information I just gave you into another system. I’ve only got a 30 minutes lunch break and you just ate it. So what can we do that’s quick, fast, efficient, and uses standard technology? Therefore where we spend our money and where we spend our time is on the valuable stuff, not just the routine stuff.
PEX Network: You say that digital really started about 2008. How do you define digital and why is it? We’ve had the internet and been “digitizing” business for a number of years now so why would you say that 2008 is the birth of it?
Ed Hutt: The World Wide Web, then the internet boom of dot com and e-commerce were two earlier stages in that growth. The third stage was about the combination of mobile, social media and the increasing computing power. Digital came after these, building on the previous three stages.
I think the distinction is one of simplicity, consumer electronic devices, and increasing online services. The reason for the 2008 date is based on the invention of computing by Alan Turing in 1941 through to 2008, we were essentially on the first half of a journey. Based on Moore’s law, computing power doubles every three or four years. Watch that doubling of computing power from what Turing could do in a very large warm room with a lot of vacuum valves and he could eventually decode some stuff, through to what I was doing at university with image processing, which was actually another large room with lots of stuff in it that created a lot of heat through to today. Now the mapping capabilities we’ve got on a small smartphone now are greater than I had on the Aries 2 image processor at university and they are considerably greater than Alan Turing ever had.
The analogy that is convenient to think of is a chessboard. If you take a bag of rice and you put one grain of rice on the first piece and then you double it on the next one, two, and then double it, four, eight, 16 and so on. By the time you finish the first half of the chessboard, which takes us up to about 2008, you’ve pretty much occupied one paddy field of rice just by that exponential effect. As you carry on deploying that same model on the second half of the chessboard, by the time you’ve finished the second half you’ve got a pile of rice that is longer and higher than the Himalayas. So as an analogy, what we’re saying is we’ve just crossed over the lexicon. We’re on square one or possibly square two of the second half. And that doubling effect has been happening and you can see that just from what you could have done five years ago, ten years ago. It’s all about technology.
How much can you physically cram into this device? This iPad alone is more powerful in computing terms than we had on substantively large servers 20 years ago.
So digital is all about simplicity. When you look at what we’ve done in Fitness First, it’s simplified things. People used to do things in a really complicated way. They said we need to write our own billing system because no billing system can possibly do what we want to do. We need to write our own CRM system because no CRM system on the market can possibly do what we do in the gyms industry. And my very humble proposition is actually a gym is a really simple thing. You turn up and you say ‘I want to join.’ We reply: ‘Sure. Give us your money. Thank you.’ A year later you decide to leave. In between, we take some money off you every month. It’s a really simple business. That is the transactional element that you have in IT. Then on top of that you add a few training schedules and you book a personal trainer or you book a class. It’s really simple stuff and yet people manage to make it complicated.
If you look at the new entrants to the market in the last three or four years, they’ve come in with a really simple view, limited number of price plans, and a limited number of ways of working, take it or leave it. And people are going yes, that’s what we want, and they take it. All of a sudden they have a majority position in the market. So do it simple. Digital is all about keeping it simple.
PEX Network: I’ve often heard the expression, getting to simple is quite complicated. What have been the challenges that you’ve had along the way?
Ed Hutt: I think that really sums it up in a sentence. If you are a new organization coming to market, it’s easier. You look at what is the latest, you say ‘I’ll have some of those,’ and you can get it up and running really quickly. If you’re a legacy organization with 30 odd years history, a load of people who have been there all the time and they’re going to fight against the change and the change in technology. So you’ve got an application map of billing, finance, membership management, CRM, sales, join online, new app over here, something over there for the traditional gym, a purchasing system, HR systems, five HR systems in other countries, payroll, purchasing; you sit and look at the list of stuff and you ask ‘why have you got all these systems?’
The CFO a few months ago said to me, ‘well done with the transformation; what more could you do?’ I replied that I was a bit constrained by the parameters that he put around it. So he told me to consider myself unconstrained and come back with a plan on what I would do. In two days I came back and said there you go, showing him my new plans. He said, ‘but it’s so much cheaper, it’s simpler, it looks easier, why didn’t you do this before?’ I explained that yes this new plan is simpler but we couldn’t do it before because there were constraints on it. Look how hard we had to fight to bring about change in what we did. If I had turned up with this he would have thrown me out inside two days. He would have said I was mad and I probably would have been. But now we’ve moved things forward, I come along and great, now we can do this. That’s the level of change that we’ve brought about.
So the big barriers have been people, technology, the way processes and systems work and the way people think. The customers are never the problem. If you give them a better way of doing things they’ll love it and want more. Better still, if you give them the ability to manage it all on their phone, brilliant. That’s exactly what people want. But that’s the way things have moved in the last six years now. That’s been the big change.
PEX Network: Taking it more to the impact on IT departments then. In the past IT departments have been more reactionary, more about keeping the lights on, keeping things running. It sounds like what we’re moving towards in particular is IT perhaps taking the lead on the business change agenda, enabling things that weren’t possible before. How did you manage that shift from reactivity to really driving the agenda?
Ed Hutt: I’m personally not familiar with just keeping the lights on, although in some organizations I have worked for I can see why that would be the case. The way I do it is you have some people who do the run bit – your job is to keep the lights on; if it breaks, you fix it. You run application management, you run incident problem change, you run the service desk, you do all the stuff in an ideal way and now that the whole ideal way is now fairly well defined you have a very, very efficient set of IT processes. Operate that way, it’s fast, it’s slick, it works well.
Then we also then split change between the bigger change that you run a certain way and other types of change that you run in a different way. A lot of the digital work we do falls into this camp of a different way.
We don’t start off by sending a gang of analysts in and asking what users requirements are. That’s because somebody will turn up and they will say my requirements are what I have today but better. So you want the current system upgraded? Yes. That’s just not going to change anything, is it? So instead we come up with an idea and go with this as a proposal. We think it should work like this. So the business will look at it and say, ‘wow, it’s so much cheaper, let's work that way because it adds value to the customer experience, the cost is lower and we have more money to invest in new ideas.’
So we’ll put up a model and decide that we think we can run the business in a certain way: two systems instead of ten, billing in here, not there, this done that way, don’t need to do that, don’t need to do that, that bit does that there, that’s cheaper, that’s faster, that’s quicker, what do you think? And a bunch of people go, great, and other people go oh, we hate it because it’s different to what we do today. Then what we do is we gradually enroll the people who are the supporters and get them on our side. You become part of our project and you become part of what we’re going to do. So we get the supporters and then the non-supporters just gradually get marginalized. It’s quite Darwinian but the reality is we really want to drive change then along the way, as my friend the CFO likes to assert, 'you can’t make an omelette without breaking a few eggs.'
PEX Network: You mention not just sending out some analysts and getting requirements from the business. How do you do it then? How do you come up with that new vision for the business knowing that it is possible?
Ed Hutt: The beauty with the digital world is that IT is now fairly well matured in most markets. So in the simple gym industry you can buy systems that run gyms. But, actually, my view is to think another way. Think in terms of we’re not a gyms industry, we’re a retailer. We’re selling stuff. What more can we sell? It’s like turning up at a retailer; you came in for a pair of shoes, can we get you to buy five dresses, three pairs of trousers and a complete make-up kit as well? If we can, we’ve succeeded. Can we apply the same out of the box different sector thinking rather than just sticking with we’re going to sell you a gym membership? It’s a different way of thinking.
Instead of sending analysts out and saying what do you want, we’ll build to what you want, we just bring a system in and go here’s Microsoft Dynamics or here’s Salesforce.com or here’s Microsoft Ax or here’s something that already exists. One of our business colleagues recently saw this “join online” system and wanted it. I had to explain that it was only the prototype. But by showing people something that looks like a real system means they can see what they want and they can then say why do you have that there, why don’t you have it down there? And all of a sudden you get members of company's top table sitting in a workshop for an hour redesigning a system. The people who sign the cheques support us by being part of the team. That’s the trick.
PEX Network: Where are you going next? What are your future plans?
Ed Hutt: Well three or four months ago I thought we were coming towards the end of the transformation and we had done what we’d set out to do. Then, of course our CFO, said 'what more can you do?' So we’re seeing this as a series of curves. We start the curve, we join it, we flatten out and then we jump onto the next thing. At the moment we’re looking at whether we can replace all of our core systems and move them onto a digital platform in nine months. We’re starting on that at the moment and along the way that will take out massive chunks of cost in our datacenter category, it’ll take out cost in the application management and support category, it will reduce the staffing numbers, it will change the staffing mix towards people who do different things.
If you go back two years, and see how the company worked then and compare it to today, it is very different and this is because the other part of digital is the system can do it, you can use a machine to do what a person used to do. For instance, getting our membership system to work with the new sales system took probably about £15-20,000 of total work and subscriptions to software but it saved us £2.9 million a year. With £2.9 million you can do an awful lot of stuff in IT. That is just one saving. So what should we use the cash on? Well, let’s spend it on some more things.
The cost reduction side and the OpEx reduction side of what we’ve done in transformation has been massive. At the end of the day, people who don’t understand IT essentially want the best possible at the lowest cost. A core part of my personal style is to look to give a down payment in transformation. So what can we save? We don’t need to have all those products. We don’t need to spend at that price with that supplier. They don’t do anything, they don’t do anything, get rid of that, how much money have I saved? And that little block of work over there in the first few months gave us enough money to fund the entire transformation program.
And remember, Fitness First is a small organization. The transformation program for a large company could net net $1 billion of sustainable annual change cost savings. That’s at the big end - one of the biggest companies in the world - down to a global SME. But the same concept applies everywhere – big to small, get a down payment in first, get a reduction in cost, you can afford to do new digital things and hopefully at least a few people will love you for it.