I will share some opportunities for Digital Transformation for a hypothetical Company in today’s episode. Click on Subscribe if you want to be informed of the new Episodes.
As I told you before, we need to understand the customer industry segment, process, vision, mission, and values beforehand. So, today, I’ll set some general guidelines as a starting point.
In general, most people can relate the concept of Digital Transformation to an industry segment where there is daily interaction between the company and the end customer.
Still, not all Industry Segments have that privilege.
The reality is quite the opposite: from a revenue standpoint, a relevant number of Fortune 2000 companies have a substantial income via indirect selling modes compared to selling directly to customers.
Based on that, I would like to take on a challenging scenario: how Digital Transformation may look for a Manufacturing company and some examples of typical areas of improvement.
Maybe we can pick a sub-segment that can either sell directly or indirectly.
OK, Jose… To the point.
What do you have in mind?
A Food & Beverage Organization is an excellent, challenging scenario to start.
I’ll do my best to cover this topic during the typical time of sharing a cup of your preferred Sunday morning beverage.
Not an easy task, but at least I can describe some aspects that we may revisit in future episodes.
A Day in the Life of a Digital Transformation Leader in a Food and Beverage Organization
Some comments before starting:
I already told you in a previous episode that one of the rules of this challenge is that the choices you take may make sense for your business and not for your competitor, so Digital Transformation is about becoming your “self-best” and not trying to replicate another business model that is not aligned with your vision, mission, and values.
One of the most common mistakes I see is organizations trying to learn the leader’s business model and replicate it: follow the leader.
My advice is to think about this: Customers have chosen you because you have a unique value for them. Digital Transformation should be used to highlight what you do best and enrich your value proposition instead of trying to emulate your competitor’s approach.
What are your thoughts about this?
Jose, why do you think replicating the leader’s model is not the best approach?
Think of it this way, transforming your business into a better version of itself is a real challenge. Often, you will experience business disruption, just trying to be a better “you.”
Can you visualize the complexity of becoming a better somebody else and the risk this takes?
It makes much more sense to become a better self and be prepared to compete and win your competition.
Does that make sense?
So, what can we learn from the leader?
It is fair to say that we can learn from the leader the power of each technology component available and play with them your way to highlight your strengths and win the competition.
So, let’s go:
A Food & Beverage company typically processes raw organic materials and packages the end product for distribution to be finally consumed by the public.
It is a Manufacturing organization that typically delivers its products via multiple distribution channels.
It may have a direct selling mode via a web portal, but it typically moves vast quantities of its products via warehouses and retail players (grocery store chains).
Do you remember why customers want to improve their business via Digital Transformation?
(If you don’t recall, here you have the Episode2 link)
My personal preferences are two:
- Customer Loyalty
- Operational Efficiencies.
Let’s talk about both of them.
Improving Customer Loyalty in Food and Beverage:
Anything you can do to let customers be informed about Food Quality in real-time will pay benefits immediately.
Use Case 1: Blockchain for product quality control.
Some business leaders have already implemented Blockchain to keep track of the quality of the raw materials and validate the supply chain: Many Food and Beverage companies utilize fresh produce (and fresh animal protein) that needs to be transported while maintaining proper temperature (animal protein); and the finished goods.
Some businesses utilize the Blockchain to keep track of environmental conditions related to fresh produce: organic compliance, vaccination, processing time, and point of origin, among others.
Can you imagine going to the grocery store and verifying the origin of the fresh produce using a QR code that carries all the crop history?
This provides deeper insight into the source of food, which is very valuable for many customers.
Business Outcome:
Business Loyalty. A direct impact of this use case is increased Business Loyalty, as now the customer may decide in real-time what food to buy based on its quality.
On top of that, there is a missing feedback loop: how the company can learn from that experience to drive operational improvements. I will discuss this later in a future newsletter.
Use Case 2: Use Artificial Intelligence to control crops and livestock’s environmental conditions.
Imagine vast agricultural areas monitored by remote sensor systems (Internet of Things). This information is compiled by proximity sensors (Drones) and delivered back to a central office.
Imagine having your crop or livestock environmental conditions mapped in business processes.
The data discovered by the Drones and IoT sensors may be analyzed in real-time by Artificial Intelligent (AI) algorithms. They will learn and optimize the environmental conditions of the fresh produce.
Imagine that you want to optimize your fresh produce to keep it organic and friendly to all consumers.
Imagine that this information can be part of the Blockchain.
You are creating tons of new information that can be comprised in a barcode, and the customer may now make a more informed decision.
Business Outcome:
Customer Loyalty. Similar to the first use case, providing more information to the customer gives a company an edge in the market. This becomes a key differentiator in the marketplace and potentially opens new markets in the process.
Imagine using this information to feed a portal with relevant news to customers to improve your brand recognition.
The possibilities are endless.
Use Case 3: Learning from Customer choices selling Direct.
There are tons of books talking about this, and there are other opportunities to improve Customer Loyalty.
Let’s talk about Operational Efficiency. How is Operational Efficiency measured?
A couple of metrics.
A Finance expert will tell you that this is measured via profitability.
You can improve profitability by reducing costs, and this is something that many (all) organizations explore periodically. Still, there is a limitation on that approach: You cannot operate at Zero cost.
At times, the best path to profitability is creating incremental revenue streams or doing things differently (innovation).
From a Digital Transformation point of view, that is often achieved by optimizing data flow between your IT platforms.
What are your thoughts about this?
In Manufacturing, especially in Food and Beverage, there are many ways to improve Operational Efficiency focusing on Supply Chain Efficiency and Enterprise Resource Management Efficiency.
Use Case 1: Integrating Supply Chain Systems (Producer, Distributor, Reseller)
There are a couple of success stories where a Food and Beverage organization has eliminated “multiple versions of the truth” by using Blockchain to synchronize the information between the producer, distributors, and retailers.
This is not a simple task, and it requires effort in each step of the value chain. Nonetheless, this provides a real benefit as now you better understand inventory levels at each value chain stage.
Business Value:
Knowing the status of your inventory using Blockchain has multiple benefits: One version of the truth, reducing (eliminating) product defects (remember that you can also use the Blockchain to monitor the integrity of the supply chain), and reducing fresh produce losses.
Use Case 2: Consolidating ERPs (or SCMs) incorporating the capability to manage Digital Transformation components.
Several ERP providers’ offerings allow the customer to incorporate Digital Transformation technologies, namely managing Big Data and Analytics, capturing IoT and IIoT, allowing Artificial Intelligence algorithms to identify data patterns, or improving existing processes with best practices.
Business Value:
This is an important goal, but it may not be perceived initially. You are becoming a “Digital Player.”
Doing this, the goal is not to achieve a new operational efficiency level but to allow the organization to become a digital player.
The information carried by new technologies (IoT, IIoT, AI, among others) creates an “Augmented reality” of the Customer perception and thinking process to buy.
By eliminating data interruption due to siloed applications, you are enabling your organization to become a Digital Transformation player. Sametime, by having your ERP and SCM upgraded to recent versions (and sometimes consolidating multiple ERP /SCM systems), you are capable of processing all new data, your “Augmented reality,” by your core systems.
This is a long-term benefit, as now you can propagate your new “Augmented reality” to all areas of the organization in real-time.
What are your thoughts about this?
One final comment:
As you may perceive, many of the proposed scenarios are a starting point. From becoming a digital organization to becoming a digital player, it will require learning and adapting your processes to have effective real-time interactions with your extended ecosystem and transform your IT organization into a continuous improvement engine.
This is where the agile methodology approach has a space.
It is also where effective Application Quality Management (AQM) has a space.
If you are interested in knowing more about this, I appreciate your letting me know. (I’d be glad to assist).
Energized? I hope so.
Next week, I will talk about a Digital Transformation component, from a broad point of view, a story for non-IT professionals. I am still deciding which may be the first. (AI, IoT, ML, The Robots, or your choice).
Good enough?
Any thoughts on the subjects raised in this edition of the Digital Acceleration Newsletter?
Please share your thoughts and feedback with the audience in the comments below.
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