So you think digital doesn’t apply to your business?

man saying no to laptopI recently had a conversation with an executive from the food and drink industry about the impact that digital would have on their business. The executive was fairly certain that digital would only have a limited impact as technology could not replace the core product or how it was consumed in the same way as, say, alternative payment solutions are impacting the banking sector or how online news providers and aggregators have disrupted the media industry.

This executive was, therefore, quite confident that whilst their organisation would have to give some thought to digital around the margins of their business (e.g. product advertising, brand awareness, etc), it would not be a major priority for the foreseeable future. In some respects this point of view makes some sense. It is impossible to replace a physical product, particularly a consumable item such as food and drink, using technology. And, as in the case of this particular business, when products are primarily sold through third parties such as supermarkets, the manufacturer does not have a direct relationship with the end customer. In such cases it would be easy to assume that the customer engagement and experience is something that can only be managed by the retailer.

But on closer inspection the view that digital has limited benefits for manufacturers of physical products or that such companies cannot be disrupted doesn’t hold up. Take for instance the drinks manufacturer Diageo that used limited edition bottles of whisky with QR codes added to each box to create personalised gifts for Father’s Day. This enabled the purchaser to upload a personal video message to a dedicated website so that the receiver of the gift could scan the QR code and view the video. This fairly simple idea created a direct relationship between the end consumer and the product manufacturer that could be used for further campaigns and promotions. It also provided an enhanced customer experience and generated advertising and social media content for Diageo to use.

And how about Coca Cola’s Share a Coke campaign, which replaced the product’s iconic logo with popular names on bottles sold in stores and also provided consumers with the ability to create their own personalised bottles via the Coca Cola online store? As well as being a very successful marketing campaign it also established a direct relationship with consumers (over 730,000 personalised bottles were purchased from the online store) and enhanced the experience of buying a bottle of Coke.

Coca Cola is a good example of a product manufacturer that is using digital to maximum effect; it is very active across all the social media platforms with campaigns and initiatives that directly engage consumers and its online store sells a wide range of branded and personalised goods. The company has also developed apps that help its sales staff also optimise the layout of a store display and estimate stock levels and auto-generate replenishment orders from photos of a storeroom.

As well as enabling innovative marketing and brand awareness campaigns digital also enables product manufacturers to create add-on services, products and experiences and to engage directly with the consumer. And, as Coca Cola has shown with its apps for sales staff, the potential of digital does not stop there.

Digital is not just about the consumer experience and the organisation’s products and services. It is also about how the organisation operates internally, how it makes decisions and how it innovates.

For example, Stanley Black & Decker has installed sensors in its manufacturing plant in Reynosa, Mexico to spot problems and delays in the production line. The sensors can identify problems on the production line much faster than people can, eliminating the need for managers to spend as much time walking round the facility. RFID tags and monitoring software provide managers with real-time feedback from the assembly lines so they can see how the plant is performing in real time. This initiative has helped to increase output and productivity at the facility.

And Minute Maid, which makes fruit juices, has created an algorithm that takes into account the quantity and quality of orange harvest around the world and determines the right combination of each type of orange needed to provide consistent taste and texture to meet forecast demand and optimise the supply chain.

Sectors based on consumable products are very unlikely to be disrupted by alternative products that are enabled by technology. However, a company that can use technology to create add-on products and services that are enabled by technology could cause disruption by offering consumers more rewarding and engaging customer experiences. And those companies that can apply digital technology to their internal operations will create cost, quality and time-to-market advantages that could also cause disruption.

Digital disruption will come to every industry at some stage; it is not a question of if but when. And that disruption could happen at any time. Assuming that it will not affect your business could be a costly mistake.

If your organisation wants to improve its senior team’s awareness and understanding of digital, develop a vision and strategy for its digital transformation, or reinvent its business model for digital then please contact me or visit my website, axin.co.uk.

Trackbacks

  1. […] a previous article, So you think digital doesn’t apply to your business?, I discussed how sectors based on consumable products are very unlikely to be disrupted by […]

  2. […] will not affect your business at any point over the next five years could be a costly mistake (see So you think digital doesn’t apply to your business?). And given that just about every executive covered by the study said that technology has changed […]

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