Can we demystify digital transformation?
It’s a question worth pondering given that digital transformation is a high priority in the consumer products (CP) industry, and yet many still view it as an abstract concept.
I started to broach this subject in my last post, in which I outlined and defined the four categories of strategic intent that CP companies can use to drive digital transformation efforts. Viewing digital transformation in this way – as taking many possible forms rather than being one massive, costly undertaking – can make it less daunting and more achievable.
Perhaps the best way to understand the different categories of digital transformation is to illustrate how CP companies are bringing them to life in real and meaningful ways.
Let’s start by looking at the two categories that are the easiest and least cost intensive to implement: differentiate and disturb.
Differentiate: Small investments can make big impacts
When CP companies use digital transformation to differentiate, they’re combining innovative uses of technology with minor financial investments to change their competitive stance.
For example, Frito-Lay, like most CP companies, uses social media for marketing and consumer engagement. But the snack foods company saw another valuable opportunity for using its social channels: product development.
In its “Do Us a Flavor” U.S. campaign launch, Frito-Lay asked consumers to dream up new potato chip flavors and submit them on the Lay’s Facebook page. Not only would Frito-Lay produce the winning flavor and sell it in stores, but the company would award $1 million to whomever submitted it.
The results were nothing short of spectacular. The campaign drove more than 22.5 million visits per week to the Lay’s Facebook page and generated a total of 3.8 million flavor submissions. It also increased sales by 12 percent – which was four times more than the company’s initial campaign goal. Furthermore, the company was able to develop a massive audience of passionate brand advocates during the product-development process at a fraction of the cost of a traditional development and launch cycle.
Moving from social media to smartphones, Nivea ran an ad in women’s magazines that included a tear-out children’s bracelet with an embedded sensor. Moms could pair the bracelet with their smartphone and use it to track their children at the beach.
With the connected bracelet, the skincare and sunscreen company was able to expand its brand perception from “protect my child from sunburn” to “protect my child.” It was a powerful example of how CP companies can create more meaningful and personal connections with consumers. What’s more, the bracelet provided substantially more consumer insights than the company could derive from its traditional channels while creating an entirely new way for Nivea to engage and interact with consumers.
In both of these examples, Frito-Lay and Nivea showed how small investments and novel technology applications can be transformative.
Disturb: Create a new way to compete
Using digital transformation to disturb the status quo involves redefining an existing business process or adopting a new process to change how you compete.
StitchFix, for example, replaces in-store shopping with a fashion and accessory concierge service. Consumers simply sign up and enter basic information about their style preferences and planned usage occasions for the clothes they’d like to buy. They then begin receiving shipments at home. They can keep what they like and return what they don’t, while also providing feedback about all the items they received.
The more StitchFix interacts with consumers, the more it learns more about their preferences. This constant engagement loop helps the company become more adept at predicting items that meet the fashion and style preferences of each individual consumer. And it helps foster deeper relationships with consumers than would normally be possible in a traditional retail environment.
Dollar Shave Club is another company that uses a subscription-based model to bypass the traditional retail channel. Consumers simply pick their shaving blade preferences and begin receiving monthly shipments.
Dollar Shave Club’s direct-to-consumer approach, combined with its strong consumer relationships and buzzy social-media presence, helped the company accumulate an impressive 3.2 million subscribers in just four years. Earlier this year, Unilever announced it would acquire Dollar Shave Club for $1 billion, a testament to brand-building and valuation.
Both of these companies share some common characteristics. As small startups, both were able to use technology to create a sense of scale. Their unique, disruptive approach enabled them to eliminate traditional barriers to entry, such as needing an established physical retail presence or making large investments in warehousing. In breaking the rules of traditional commerce, they were able to compete with established CP companies at a fraction of the cost.
Big things can have small beginnings
All of the examples highlighted show that companies don’t need to boil the ocean to achieve digital transformation. Instead, digital transformation can result from something as simple as a good idea that is brought to life with the right technology strategy.
In my next post, we’ll look at examples from the more comprehensive categories of digital transformation: displace and disrupt.
For more insight on digital disruption, see Why Culture Change Is Essential For Digital Transformation.