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October 22, 2024
Few retail and consumer goods companies have embraced digital transformation as comprehensively and successfully as Adidas. Over the past five years, the iconic sportswear brand has undergone a remarkable metamorphosis, transitioning from a traditional wholesale-focused business to a digital-first, direct-to-consumer powerhouse. This extensive transformation touches every aspect of the company, from its technology infrastructure to its organizational structure, culture, and business model.
For technology leaders across industries, Adidas’ journey offers a wealth of insights and lessons. It demonstrates how a legacy brand can reinvent itself for the digital age, leveraging cutting-edge technologies and innovative practices to not just keep pace with digital natives but outperform them. This article traces Adidas’ transformation based on presentations they have given at DevOps Enterprise Summit (now called the Enterprise Technology Leadership Summit), offering a comprehensive playbook for technology leaders seeking to drive similar changes in their own organizations. (You can view the full playlist of presentations this article is based on here.)
Adidas’ digital transformation story began in 2018 at DevOps Enterprise Summit in London. Here, the Adidas team, including Fernando Cornago, who would later become VP of Digital Tech, heard a presentation by Jason Cox from Disney. This talk proved to be a catalyst, inspiring the Adidas team to reimagine their approach to technology and its role in the business.
Returning to Germany, the team was energized with a new vision: to create a centralized technology group that would drive engineering excellence across all business units. This wasn’t just about upgrading systems or adopting new tools. It was about fundamentally reimagining how Adidas operated in the digital age.
The vision was ambitious: to transform Adidas into a digital-first company, with a target of reaching 50% direct-to-consumer business by 2025. This goal would require not just technological changes but a complete overhaul of the company’s operations, culture, and go-to-market strategy.
Adidas needed to completely overhaul its technology infrastructure to support its digital ambitions. The company embarked on several key initiatives:
Adidas moved away from monolithic systems to a more flexible, scalable architecture based on microservices and micro-frontends. This approach allowed teams to work independently, deploy changes more frequently, and scale specific components as needed.
The transition wasn’t without challenges. It required retraining staff, refactoring existing applications, and implementing new tools and processes. However, the benefits quickly became apparent. Teams could now deploy updates multiple times a day rather than in large, risky monthly or quarterly releases. The increased agility allowed Adidas to respond more quickly to market trends and customer feedback.
Recognizing the need for scalability and flexibility, Adidas adopted a multi-cloud strategy. They leveraged services from major providers like AWS, Azure, and Google Cloud Platform, tailoring their use to specific needs across the business.
The company didn’t just lift and shift existing applications to the cloud. Instead, it used the move as an opportunity to re-architect systems, taking full advantage of cloud-native technologies. This included adopting containerization with Kubernetes, implementing serverless architectures where appropriate, and leveraging managed services to reduce operational overhead.
Adidas fully embraced DevOps principles, implementing robust continuous integration and continuous delivery (CI/CD) pipelines. This allowed for faster, more reliable software releases and fostered a culture of experimentation and rapid iteration.
The company invested heavily in automation, creating self-service platforms that allowed developers to provision resources, run tests, and deploy code with minimal manual intervention. This not only increased speed but also improved consistency and reduced errors.
Recognizing that data was the lifeblood of their digital operations, Adidas developed an innovative approach to data warehousing called “blender.” This framework applied DevOps principles to data management, enabling more agile, collaborative data operations.
Blender allowed teams to version-control their data models and transformations, run automated tests on data pipelines, and deploy changes to production rapidly and reliably. This was crucial for driving insights and personalization efforts across the business.
To better visualize and manage business capabilities, Adidas introduced the “capability diamond” concept. This tool helped bridge the gap between business and technology teams, providing a common language for discussing features and prioritizing development efforts.
The capability diamond concept mapped out how different technological components came together to deliver specific business capabilities. This helped in planning, allowed for better reuse of components across the organization, and ensured that technology development was always tied to concrete business outcomes.
Adidas recognized that technology alone wouldn’t drive transformation; they needed to reshape their organization to support their digital ambitions:
The company established multiple technology hubs around the world, each with specific responsibilities. This approach allowed Adidas to tap into global talent pools and create centers of excellence for different aspects of its digital operations.
For example, the hub in Spain focused on platform engineering, while the one in India specialized in e-commerce technologies. This distributed model provided access to diverse talent and allowed for 24/7 development and support capabilities.
Rather than organizing teams around traditional IT silos, Adidas aligned them with steps in the consumer journey. This customer-centric approach ensured that technology development was always tied to concrete business outcomes and customer needs.
Teams were formed around product discovery, checkout experience, and post-purchase engagement. This alignment helped break down silos between different parts of the organization and fostered a more holistic approach to the customer experience.
To ensure alignment across the organization, Adidas implemented Objectives and Key Results (OKRs). This framework helped cascade high-level strategy down to individual teams, creating a clear line of sight between daily work and company goals.
The company invested significant time in training leaders and teams to create effective OKRs, ensuring that objectives were ambitious yet achievable and that key results were specific and measurable. This approach helped maintain focus and drive accountability across the organization.
Recognizing the strategic importance of technology, Adidas invested heavily in building internal engineering talent. This reduced reliance on external vendors and fostered a strong, culturally-aligned tech workforce.
The company created comprehensive training programs, mentorship opportunities, and clear career progression paths for technologists. To attract top talent, it also implemented innovative recruitment strategies, including hackathons and open-source contributions.
Adidas’ transformation journey wasn’t without its challenges. The company faced several significant hurdles that tested its new capabilities:
As Adidas’ e-commerce presence grew, so did the technical challenges. The company had to build systems capable of handling extreme spikes in traffic, particularly during limited-edition product releases that could generate thousands of orders per second.
To address this, Adidas implemented advanced queueing systems, leveraged cloud auto-scaling capabilities, and optimized their applications for high concurrency. They also developed sophisticated inventory management systems to ensure accurate stock information even under high loads.
When the pandemic hit in 2020, Adidas had to rapidly pivot. With physical retail largely shut down, e-commerce became the primary sales channel overnight. The investments in digital infrastructure paid off, allowing the company to meet the sudden surge in online demand.
Adidas quickly scaled up its online operations, redeployed staff to support digital channels, and accelerated the rollout of features like contactless delivery and virtual try-ons. The flexible, cloud-based infrastructure allowed them to rapidly increase capacity to meet demand.
As a global company, Adidas had to navigate an increasingly complex landscape of data privacy regulations, including GDPR in Europe and various laws in other markets. This required flexible, adaptable systems that could comply with diverse regulatory requirements.
The company implemented sophisticated data governance tools, allowing for fine-grained control over data access and usage. They also adopted a “privacy by design” approach, baking data protection principles into all new products and features from the ground up.
From trade tensions to regional conflicts, Adidas had to maintain operational flexibility in the face of geopolitical challenges. The company’s distributed technology model and agile practices helped it adapt to rapid market changes.
For instance, when faced with supply chain disruptions, Adidas leveraged its advanced data analytics capabilities to optimize inventory allocation across markets. The flexible e-commerce platform allowed for quick product availability and pricing adjustments in response to local conditions.
In 2022, Adidas faced significant business challenges, including the loss of a major brand collaboration. This required rapid cost optimization, including reducing the size of the technology team. The robust, scalable systems put in place during the transformation allowed the company to maintain performance even with a leaner team.
The modular, cloud-based architecture allowed Adidas to quickly scale down certain operations without impacting overall system stability. Automation and self-service capabilities, implemented during the transformation, proved crucial in maintaining productivity with a smaller team.
Throughout their journey, Adidas adhered to several core principles that guided their transformation:
A constant focus on the rapid deployment of new capabilities allowed Adidas to stay ahead of market trends and consumer demands. The company adopted a “two-pizza team” model for many projects, ensuring teams were small and nimble enough to move quickly.
By investing in robust data infrastructure and analytics capabilities, Adidas ensured that both business and technology decisions were grounded in solid data. They implemented real-time dashboards and analytics tools, giving teams instant access to key performance metrics.
Solutions were designed to work across Adidas’ global operations from the ground up, allowing for rapid scaling of successful initiatives. This included building multi-language, multi-currency support into core systems and ensuring compliance with diverse regional regulations.
Wherever possible, Adidas aimed to automate processes and provide self-service tools, empowering business users and reducing IT bottlenecks. This ranged from automated testing and deployment pipelines for developers to self-service analytics tools for business users.
While pushing for rapid innovation, Adidas maintained a strong focus on system stability and security, which is crucial for maintaining customer trust and business continuity. They implemented robust monitoring and alerting systems, conducted regular security audits, and maintained strict change management processes for critical systems.
Perhaps the most crucial aspect of Adidas’ transformation was the cultural shift within the organization:
Adidas worked to create a unique culture that combined the passion and teamwork of sports with the innovation and precision of technology. To energize and unite the tech workforce, Adidas organized internal hackathons, coding competitions, and tech showcases, often with a sports theme.
By clearly linking technology work to business outcomes and customer experiences, Adidas fostered a sense of purpose and value among its engineering teams. Regular all-hands meetings showcased how tech projects were impacting the business and improving customer experiences.
The company promoted a culture of continuous learning and adaptation, crucial for keeping pace with rapidly evolving technology and market conditions. They implemented a comprehensive learning and development program, encouraging employees to dedicate time to acquiring new skills and experimenting with new technologies.
Cross-functional collaboration was emphasized, breaking down traditional barriers between business and technology teams. Adidas implemented rotation programs, allowing technologists to spend time in different business units and vice versa, fostering better understanding and collaboration.
Adidas cultivated a culture where failure was seen as a learning opportunity rather than something to be avoided at all costs. They implemented “blameless post-mortems” after incidents, focusing on systemic issues rather than individual mistakes, and celebrated “successful failures” where valuable lessons were learned.
As Adidas continues its transformation journey, it’s already looking ahead to the next wave of technologies that will shape its future:
The company is exploring applications of generative AI, particularly in areas like product design inspiration and personalized content creation for marketing. They’re experimenting with AI-generated product descriptions, personalized email content, and even AI-assisted design tools for their product teams.
Leveraging its robust data infrastructure, Adidas is pushing toward hyper-personalized customer experiences across all touchpoints. This includes personalized product recommendations, customized homepage experiences, and even individualized pricing strategies based on customer loyalty and behavior.
In line with its broader sustainability goals, Adidas is investigating how technology can drive more sustainable business practices, from supply chain optimization to reducing digital carbon footprints. They’re exploring blockchain for supply chain transparency, AI for optimizing logistics to reduce emissions, and green cloud computing practices.
Adidas is investing in AR and VR technologies to enhance both the customer experience and internal processes. This includes virtual try-on experiences for e-commerce, AR-powered in-store navigation and product information, and VR tools for product design and collaboration.
The company is exploring IoT applications in its products and operations. This includes smart clothing with embedded sensors for performance tracking and IoT-enabled manufacturing and logistics processes for improved efficiency and quality control.
For technology leaders looking to embark on a similar transformation journey, Adidas’ experience offers several valuable lessons:
Adidas’ transformation was guided by a clear, ambitious vision of becoming a digital-first, direct-to-consumer company. This north star helped align efforts across the organization and justify the significant investments required.
The early investments in cloud infrastructure, microservices architecture, and DevOps practices laid the groundwork for future innovations. These foundational elements provided the flexibility and scalability needed to rapidly develop and deploy new capabilities.
Adidas’ reorganization around consumer journeys and global tech hubs shows the importance of structuring teams to support strategic goals. This alignment helped ensure that technology efforts were always in service of key business objectives.
Building a strong internal engineering team was crucial for driving and sustaining the transformation. Adidas’ recruitment, training, and career development investments helped create a skilled, motivated workforce aligned with the company’s goals.
The ability to rapidly adapt to challenges like the COVID-19 pandemic demonstrated the value of building flexible, scalable systems. Adidas’ agile practices and cloud-based infrastructure allowed them to pivot quickly in response to changing market conditions.
Adidas’ efforts to blend sports and tech cultures highlight the importance of cultural transformation alongside technological change. The company recognized that true digital transformation requires a shift in mindset and ways of working across the organization.
Throughout its transformation, Adidas kept the customer experience at the center of its efforts, ensuring technology served business and consumer needs. This customer-centric approach helped prioritize initiatives and drive meaningful improvements in the consumer experience.
While pushing for rapid change, Adidas never lost sight of the need for reliable, secure systems to support its growing digital business. This balance between innovation and stability was crucial for maintaining customer trust and business continuity.
Investments in data infrastructure and analytics capabilities were key to driving informed decision-making and personalization efforts. Adidas recognized early on that data would be the fuel for their digital transformation and invested accordingly.
Even as it navigated immediate challenges, Adidas continued to explore emerging technologies to stay ahead of the curve. This forward-looking approach helps ensure the company doesn’t just catch up to digital natives but positions itself to lead in the future.
Adidas actively participated in and contributed to open-source communities, recognizing the value of collaborative innovation. This not only improved their technology but also helped in attracting top talent who valued working with cutting-edge, open technologies.
Throughout the transformation, Adidas maintained a strong focus on measuring progress and communicating wins across the organization. This helped maintain momentum and secure ongoing support for the transformation efforts.
Adidas’ digital transformation journey is far from over. Like the athletes who wear its products, the company knows that in the digital age, there is no finish line—only the next challenge to overcome. From its initial inspiration at a conference in 2018 to its current position as a digital retail leader, Adidas has demonstrated the power of a comprehensive, sustained transformation effort.
The company’s journey showcases how digital transformation is about adopting new technologies and fundamentally reimagining how a business operates in the digital age. It requires changes to technology infrastructure, organizational structure, business processes, and perhaps most importantly, company culture.
Adidas’ success in this transformation is reflected in its numbers: growing from €1 billion in e-commerce revenue in 2015 to €5 billion in 2022, becoming one of the top 5-10 mono-brand e-commerce operations globally. But perhaps more importantly, it’s reflected in the company’s newfound ability to rapidly adapt to changing market conditions and customer needs.
The journey hasn’t been without its challenges. From the technical complexities of scaling systems to handle massive spikes in demand during product launches to the organizational challenges of shifting to a more agile, digital-first culture, Adidas has had to overcome numerous obstacles. The COVID-19 pandemic presented a particularly stern test, forcing the company to rapidly pivot to an almost entirely digital operation virtually overnight. Yet, thanks to the foundations laid during its transformation efforts, Adidas was able to not just weather the storm but thrive in the new digital-first reality.
As we look to the future, Adidas’ transformation journey offers several key takeaways for technology leaders across industries:
Looking ahead, Adidas is well-positioned to continue leading in the digital age. The company’s exploration of technologies like generative AI, advanced personalization, and sustainable tech solutions demonstrates its commitment to ongoing innovation. At the same time, its focus on core principles like speed, flexibility, and customer-centricity provides a stable foundation for future growth.
For technology leaders embarking on their own digital transformation journeys, Adidas’ story offers both inspiration and practical guidance. It shows that with the right vision, investment in technology and people, and a willingness to continuously evolve, even traditional companies can transform themselves for the digital age.
The key is to approach digital transformation not as a destination but as an ongoing journey of innovation and adaptation. It requires a holistic approach that encompasses technology, organization, culture, and business strategy. It demands a willingness to take risks, learn from failures, and continuously push the boundaries of what’s possible.
As we move further into the digital age, the ability to drive and sustain digital transformation will become increasingly critical for business success. Companies that can emulate Adidas’ approach—combining bold vision with practical execution, balancing innovation with stability, and putting the customer at the center of everything they do—will be well-positioned to thrive in the rapidly evolving digital landscape.
In the end, Adidas’ digital transformation journey is a testament to the power of technology to reinvent even the most established of companies. It shows that with the right approach, traditional businesses can not only compete with digital natives but can leverage their unique strengths—like Adidas’ brand power and sports heritage—to create distinctive, compelling digital experiences.
As we look to the future, it’s clear that the race of digital transformation is far from over. New technologies will emerge, customer expectations will evolve, and market conditions will continue to shift. In this never-ending race, success will go not to the biggest or the oldest but to those who can adapt the fastest and innovate effectively. By embracing continuous transformation, fostering a culture of innovation, and keeping a relentless focus on the customer, companies can follow in Adidas’ footsteps and sprint confidently into the digital future.
For technology leaders, the message is clear: the time for digital transformation is now. Whether you’re just starting your journey or looking to accelerate your efforts, Adidas’ story provides a comprehensive playbook for success. By learning from their experiences – both their successes and their challenges – you can chart a course for your own organization’s digital future.
Remember, standing still is not an option in the digital transformation world. Like Adidas, you must be willing to continuously evolve, experiment, and learn, and push the boundaries of what’s possible with technology. The race is on, and with the right approach, your organization can be at the forefront of the digital revolution.
Articles created by summarizing a piece of original content from the author (with the help of AI).
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