Digital transformation is a hot topic in Corporate America for good reason: legacy companies, selling “real” products with established value and customers nurtured over many years, are getting crushed by new companies who seemingly have no value other than some digital-internet-mobile-social voodoo.
$SC was notable for having a great sales video and direct-to-consumer relationships but it neither made its products or mass promoted nor distributed them; a perfect disruption in the mass distribution channels.
The lesson is not in the disruption, but rather how it is possible to reinvent, innovate, and leverage up existing assets.
My friend Rob called bullshit on me regarding “how easy” is was to digitally transform a legacy company into a modern day Uber or Airbnb of a given category.
Since both Rob and I use Business Architecture as a way to describe value creation in any given company, it was fairly easy to explain how one might transform a traditional company with some applied digital tools and techniques.
Rob knows I dislike dogs (cat guy), so he said I was CEO and asked how I would digitally transform a dog food manufacturer. Let’s assume this is a $1B revenue business, operating for 50+ years, has a strong regional brand with loyal customers, strong distribution to specialty pet stores, food, drug, and mass merchants, and sells 10 SKUs of wet and dry dog food.
A business architectural analysis of the potential for Digital Transformation highlights 4 value streams that support the opportunity:
- Product Manufacturing, with both the recipes and the branding. Labels alternative branding are inexpensive,
- R&D knowledge about dogs, their diet, nutrition, and overall health
- Strong just in time operations and logistic to service over 2,000 accounts
- Basic ERP systems, accounting and general technology systems integrated across most of the Operations, though lacking for sales, marketing, and customer relationships.
To undertake a digital transformation, key missing components would have to be addressed:
- A value stream that dealt with the customer or “end-user” as a stakeholder. Having relied upon a traditional distribution and direct retail relationship, there was no knowledge about or engagement with the actual customer: the person, family, or dog.
- Further, there are no capabilities or information in support of consumption or purchase behavior. There was nothing about the dog’s health, activity, age, location or its’ well being. For example: was the dog on a farm or ranch or in a city apartment?
Starting with low-hanging fruit — things other companies are doing and 3rd party suppliers offer — we came up with these ideas that address both the relationships with consumers and the underlying economic model. These ideas are easily applied using existing assets and value streams and minimal investments for pilots and test markets.
- License an activity tracker digital device (e.g., Fitbit, Garmin) or for dogs. This will include a smartphone and computer app tailored and branded to the company specifications. Critical to this is an understanding of diet, activity, and nutrition. For example, the dog may be more active in the summer and need more protein, but less active in the winter and need fewer calories with more vitamins and other nutrients.
- Create a CRM infrastructure and outreach program to individuals; this includes customer accounts and billing, customer service, and related logistics capabilities. The CRM should also be tied to advertising and other outreach programs.
- Develop and promote a custom direct-to-consumer distribution program that automatically sends “customized” food. A TBD big issue is the ability to change formula and recipe to meet certain requirements for calories and quantity. Ideally, Fido would have his own label with portion control.
Disruption to existing channels of distribution can be offset with data and knowledge about customers and purchase behavior, plus separation with new branding and direct to consumer (and dog) relationships.
This is certainly an oversimplification and abbreviated description of both Business Architecture and Digital Transformation. It does however exemplify the clarity of thinking and ability to focus strategy into a few meaningful and actionable activities.
We can do this for your business. Contact me.