August 2014: How Digitization is About to Change the Rules of Your Business
How Digitization Is About to Change the Rules of Your Business
Companies that digitize processes can improve their bottom lines and delight customers. Leaders that ignore the march of digitization are heading for trouble.
According to a recent article by McKinsey & Company, the benefits of digitization are huge: by digitizing information-intensive processes, costs can be cut by up to 90% and turnaround times improved by several orders of magnitude. Examples span multiple industries: one bank digitized its mortgage-application and decision process, cutting the cost per new mortgage by 70 percent and slashing time to preliminary approval from several days to just one minute. A shoe retailer built a system to manage its in-store inventory that enabled it to know immediately whether a shoe and size was in stock—saving time for customers and sales staff.
In addition, replacing paper and manual processes with software allows businesses to automatically collect data that can be mined to better understand process performance, cost drivers, and causes of risk. Real-time reports and dashboards on digital-process performance permit managers to address problems before they become critical. For example, supply-chain-quality issues can be identified and dealt with more rapidly by monitoring customer buying behavior and feedback in digital channels.
The results of digitization are profound:
- Much greater pressure on pricing and margins from transparency and ease of comparison, making differentiation or low costs critical.
- New types of competitor emerge without the legacy baggage, and start quickly by disaggregating the value chain.
- Talent-mismatches become competitive threats.
It's easy to assume that these forces mostly apply to industries like financial services, media, or manufacturing – but that would be a wrong. Consider what's already happening in produce:
- AmazonFresh, FreshDirect, and Instacart (among many others) have much better data on what shoppers want and what is available, and what the quality is like – in real time.
- Companies like Yummly, AllRecipes are mining billions of in app and online shopper interactions to gain new insights into what flavors, ingredients or products are trending, and who is leading the shift.
- The long tail of consumer demand is much better satisfied by digital shopping tools. 61% of shoppers who said they purchased groceries online did so because they wanted something they couldn't find in their store.
- Precision agriculture combines data from sensors, weather, soil, etc. to inform planting and additions to improve yield and reduce waste. Combined with predictive techniques, a grower can enhance their expertise with algorithmic-based recommendations. In a price-sensitive business, a small edge like this can make the difference between profit and loss.
- Dramatically increased transparency – for example from traceability – is giving brands, retailers, and consumers a new way to relate to products they buy. Whole Foods is already giving preferential marketing treatment to some growers based on their sustainability, which is enabled by a new digital platform for vendor recordkeeping and traceability.
- Information-intensive activities, such as produce inspections on farms, in coolers, at DCs and in stores, are being digitized thanks to the low cost of powerful mobile devices and the ease of web-connected apps. Rather than keying results into an Excel spreadsheet that isn't used, retailers and shippers now have near real time supplier scorecards, predictive quality trends, and quality improvement tools.
If you're interested in finding out how we can help you win in this transformation to digitization, please contact us.
Retail's Goliath Meets its Next David
How Personalization Changes the Rules in the Battle for the Health-Seeking Shoppers
It's an elegant strategy: Carry a comprehensive selection of low-priced products in a convenient location and let shoppers choose what they want to buy. Companies such as Walmart grew into giants by perfecting this formula. Retailers like Kroger and Safeway built brilliant loyalty programs to glean insights into what shoppers were buying, in order to better target promotions and merchandizing.
Then Amazon perfected a brick-and-mortar killer strategy: mass personalization. A Web site that knows a user's location and buying history will be able to present offers on a breathtaking range of products and suggestions tailored to the shopper.
We are now entering a new era of technology in retailing. The Goliath strategy of scale creates a space for more nimble players to leverage technology and change the rules of engagement: competing using personalization and mobile to attract and engage the health-and-wellness focused shopper.
David knew he couldn't slay Goliath with brute force or wielding a sword more skillfully... he had to change the rules of the game. Mass personalization creates the opportunity for retailers to compete on different terms: focus more accurately on what small groups of their customers are looking for, merchandize what they want, and enabling them to buy a 'long tail' product online if it isn't in store. The first step is identifying what groups of your shoppers are looking for – whether its middle-aged moms looking for low gluten food and easy choices for weight management, or seniors who are worried about osteoporosis, or men keen on a heart-healthy, paleo diet.
New business models will emerge that integrate shopping, exercise, pharmacy, health insurance and lifestyle – with technology and data analysis as the 'glue' between on-line and off-line engagement. Healthy food suppliers and retailers have a unique opportunity to be in the center of this shift.
Read the full version of this article in the August edition of Grocery Headquarters.