the five horsemen of digital disruption

BEHOLD! THE FIVE HORSEMEN OF

DIGITAL DISRUPTION!

SPEAKER NARRATIVE: Good morning, everyone! Question: how many of you have seen X-Men: Apocalypse? Today I want to talk about that buzzwordy catch phrase Digital Disruption – and I’m going to do it in the context of super-powers. But in my little alternate reality, these super-villains are actually super-heroes, with powers that will help you navigate the politically risky but often rewarding practice of Digital Transformation.

LOTS OF PEOPLE talk about Disruption like IT’S FAST AND PAINLESS.

EBEV EUROPE • JULY 2016 3

Puh-LEEEZE.SPEAKER NARRATIVE: My friends and I in the consulting business roll our eyes when we see people throw around b-school words like Disruption. It sounds so easy, so lofty. Pundits scold companies for not embracing it. But I’ve worked with enough corporate teams to know that NO ONE likes disruption. Or change agents. Why? Processes are complex. They take a lot of time to create and get right. Teamwork requires consistency and easily-learnt patterns. And we’re rewarded for getting stuff done quickly. The reality is, Disruption is a negative. Dealing with it is just plain hard work.


SPEAKER NARRATIVE: Over the last 26 years, I’ve worked with beverage companies, CPG firms, governmental bodies – a total of 80 major brands — as a disruptor. I’m either hired to CREATE the disruption, or to help the organization DEAL with disruption. Sometimes that’s been through factory automation, or convincing auto dealers to adopt digital tools, or figure out a new way to problem-solve for customers. But the real challenge is helping them ADJUST to change. Learning new patterns. Figuring out how to optimize. Who’s in charge. Adjusting to new tools.

Digital Transfor-mation, Strictly speaking…

Adopting and deploying digital tech and business models to improve performance in a measurable way.

GGooaall:: ppoossiittiivveellyy aaffffeecctt yyoouurr mmaarrkkeett ppoossiittiioonn aanndd vvaalluuee pprrooppoossiittiioonn..


SPEAKER NARRATIVE: Instead of focusing on the impact of Disruption, let’s look at process of Transformation. First, having a common definition is important. For me, it means adopting and deploying digital technologies and business models to improve performance. Maybe that means reducing costs, or outcompeting another firm, or reusing or monetizing manufacturing offal. No matter what, no change is good unless we’ve created a net positive.


SPEAKER NARRATIVE: We’ve all seen digital disruption turn categories upside down. Riots over Uber. Industry-sponsored legislation against AirBNB. Banking is being disrupted by offerings like Transferwise. Fashion is being turned upside-down by Burberry, Net-a-Porter and Gilt. Now even AirBNB is being disrupted by OneFineStay, which combines the AirBnB idea with hotel partnerships.


SPEAKER NARRATIVE: Uber is old news, but what’s not often discussed is that Uber’s value surpassed GM, Ford, Hertz, Avis in five years. GM and Ford are more than 100 years old. The benefits for customers were obvious: friendlier drivers, better cars, convenience, automated receipts, automatic billing, and better customer experience.


SPEAKER NARRATIVE: These are big shifts. Just a few months ago, San Francisco’s iconic Yellow Taxi filed for bankruptcy, citing pressure from Uber and Lyft. Disruption happens fast – and the stakes are very high.

Meanwhile…

▶ 5000 Bev brands – only 150 or so will surpass $10MM in sales this year

▶ Consumer demand for healthier beverages

▶ Ongoing interest in premium local craft beers, spirits and sodas▶ Or purchaseD by corporate brands

▶ Fragmentation through new product categories like teamonades, probiotics or THC infusions


SPEAKER NARRATIVE: Let’s look at Beverage. There are over 5,000 brands, but one big reality is that only 150 or so will top $10MM in sales in 2016. So while entry is easy, the new guys have to find new niches and ways to compete. The good news is that consumer demand for healthy choices continues to increase. Demand for craft products is still growing, so much that ”corporate beer” is buying up indies. As a native of Seattle, it was shocking to see one of our local favorites, Elysian, get purchased by AB Inbev, especially since Elysian’s owners were long-time board members of the Brewers Association. Finally fragmentation continues with new categories like teamonades, probiotics and even THC infusions.


SPEAKER NARRATIVE: And talking about innovation: I wanted to point out the wild west of cannabis-infused beverages – everything from coffees (in Keurig packaging!), to teas, colas, spirits and wines. Strange to live in Washington State and see these appearing on shelf, along with email invites to cannabis marketing conferences. I mean, these are fully-baked products!

What your CPG peers are thinking

44%believe digital

disruption increases the

risk of going out of business

70%believe

disruption will come from inside the categorY…

33%of “category growth will come from

categories that don’t yet exist”

EBEV EUROPE • JULY 2016 11SOURCES: CISCO, “DIGITAL VORTEX” REPORT, 2015G. SCOTT UZZELL, COCA-COLA VENTURING/EMERGING BEVS

SPEAKER NARRATIVE: You may think that consultants like me just get paid to instill fear in order to generate new clients. But your peers in the CPG and beverage categories are the ones reporting this disruption. My job is to help you anticipate the disruption and adjust in a way that reduces the transformational impacts and helps you identify opportunities to beat the competition.


SPEAKER NARRATIVE: Four major internal obstacles typically slow Transformation. The first is Chaos – in both people and process. When one of my tech clients got social fever, it responded by creating over 800 FB accounts and 600 Twitter accounts. No one could find the main page! The second is Risk Aversion. It’s politically very risky to challenge the status quo or ask for a new budget – even when others have preceded you. Third is the Politicsgenerated by change – opportunists will try to take credit while others will sabotage efforts. Finally is what I call Budget Darwinism – companies that only innovate when there’s an obvious ROI.

“No, you go first.”

25%actively

disrupting their own

businesses

32%taking a

“follower” approach

45%say

disruption isn’t a

“board-level concern”

EBEV EUROPE • JULY 2016 13SOURCES: CISCO, “DIGITAL VORTEX” REPORT, 2015

SPEAKER NARRATIVE: So while a healthy 25% of CPG companies are actively disrupting their own businesses, 75% aren’t. 32% are waiting and seeing. And stunningly, a whopping 45% of their boards don’t think it’s a concern. Maybe like Blockbuster. Circuit City. Radio Shack. Borders. And the Taxi business.


The future-proofing imperative

40%of incumbents across all industries will be displaced by digital

disruption in the next five years.

SOURCES: CISCO/IMD, “DIGITAL VORTEX” REPORT, 2015

SPEAKER NARRATIVE: Despite management doubts, the hard reality is that the majority of CPG executives believe that 4 out of 10 incumbents in their category will be displaced from leadership positions within the next five years. Which means the time to begin future-proofing is RIGHT NOW.


SPEAKER NARRATIVE: That brings us to our Five Horsemen. I’m taking some liberties here because technically Apocalypse ISN’T one of the horsemen in the X-Men storyline. While they play villains in the movie, they also possess five important superpowers YOU need to bring to enable successful transformation– the kind that gets your boss – and you – your bonuses.


PRECOGNITIONabout future threats —

and opportunities

SPEAKER NARRATIVE: The first horseman (horsewoman) is Psylocke, who has the power of PRECOGNITION. She can see the future. You need this skill as well. Not just to foresee future threats from inside or outside your category, but also to see opportunities to craft new offerings that no one else has identified. That might be something like caffeine-infused sodas, or the tea capsules Unilever’s Oliver and Nuria discussed yesterday.


A culture of

SPEED & AGILITYSPEAKER NARRATIVE: Angel has the ability of flight. He represents SPEED & AGILITY. Being able to move and create quickly is a key component of organizational disruption. This means more rigorous updates, a fail-quickly-and-adapt mentality, some organizational autonomy from departments like Legal and PR, and rapid and continuous improvement.

The ability to

ALTER INFRASTRUCTURE & PROCESS

18EBEV EUROPE • JULY 2016

SPEAKER NARRATIVE: Magneto represents the ability to move things that seem heavy and immobile: things like INFRASTRUCTURE and PROCESS. Often in organizations, these are the most difficult things to move, and changing processes or technologies can seem impossible. But with the right preparation, it can be done. More on that shortly.


ADAPTABILITYto respond to changing

conditionsSPEAKER NARRATIVE: Storm controlstheweatherconditions,andcanproductlightning,atornado,hail,orfloods.Likeher,youneedADAPTABILITYtorespondtoconditions.Becauseflexibilityandadaptabilityarejustasimportantasagility.Onefoodclientofminehashadaverysteady,conservativebrandpropositionfordecades,butthroughrecentsociallisteningandsearchdata,foundthatplayingnicewasgettingthemnowhere.We’rehelpingthemchangetheirvaluepropositiontotakeonamuchstrongerchallengerpersona.


LEADERSHIPof both management

and employees

SPEAKER NARRATIVE: Finally, Apocalypse is the leader of his team and has the power to control people’s minds. While that starts getting a little creepy, you DO need the powers of LEADERSHIP and PERSUASION to enable the right changes within the organization. The ability to persuade management as well as leading people past their own risk aversion. This is perhaps the most important superpower to have.

Measuring digital maturityA precog model for benchmarking


SPEAKER NARRATIVE: So where do we start? We take a benchmark of your organization’s digital maturity level. This lets us understand where you are now – as well as where your competitors are. From this benchmark, we can begin to plot a path to smart disruption and effective transformation.

How execs typically VALUE INNOVATION

LAUNCHING NEW PRODUCTS, SERVICES

OR BUSINESSES

IMPROVING EXISTING PROCESSES AND COMPRESSING

LIFECYCLES


IMPROVING EFFICIENCIES

THROUGHOUT THE VALUE CHAIN

FINDING NEW REVENUE STREAMS WITHIN

EXISTING PRODUCTS & SERVICES

LOWER DIGITAL MATURITY HIGHER DIGITAL MATURITY

SPEAKER NARRATIVE: These are all spot-on. But to implement ANY of these requires a number of enablers.


SPEAKER NARRATIVE: Real commitment means taking a much more detailed, difficult look in the mirror. There are numerous indicators that can help identify the needed attitudes, flexibility and leadership that will enable disruption and innovation success. We start by interviewing key members of the organization in order to help us rank the firm using standardized scales.

We can start to see patterns that call out specific hindrances…and POTENTIAL solutions


Innovation LaggardS WISHFUL Thinkers

SPEAKER NARRATIVE: Different types of companies have different Innovation Archetypes. Each one has its own types of challenges. Innovation Laggards are where many companies fall. No one is really comfortable or empowered to taking risks, management doesn’t really see any need to innovate, employees aren’t incented to try. They will need a major marketplace upset to push them into action. Our second example has the foresight and concern and desire, but struggles with a lack of management support, resources, training, process, and siloes.

who’s running the sanitarium?


LAME DUCKS GRASS-ROOTS ACTIVISTS

SPEAKER NARRATIVE: On the left, we have a Management Driven company, who is pushing the team to innovate and providing support to do so. But the team isn’t properly trained nor motivated and isn’t on the same page. In this case, team storytelling, clarity around purpose, and some incentives would help quite a bit. On the right is an Employee Driven company, in which, usually out of sheer necessity, the team has become quite agile and flexible, but has little management support. The innovators here will need to connect the dots to executive KPIs and competitive threats to effect the necessary change.

Sometimes, process AND INNOVATION FIGHT


SPEAKER NARRATIVE: Sometimes a more staid, process-driven company can enjoy consistent output, widespread operational knowledge and rigor. Process has always worked for them. But now the process is actually getting in the way of any meaningful innovation.

LUDDITES


SMART TRANSFORMATION IN

TEN STEPSSPEAKER NARRATIVE: Once we have a benchmark metric and an innovation profile, we can determine the best transformational approaches for that team. Let me share ten steps that make the pain of internal transformation less painful and more real.


STEP 1: INNOVATION MANAGEMENT PLAN

▶ Why change is needed

▶ THE CHANGES TO People, Process & Tools YOU PROPOSE

▶ Future threats being addressed

▶ Including The cost of doing nothing

▶ HOW ROI is calculated

▶ HOW INNOVATION WILL capture additional value & revenues

▶ HOW Change is being managed

▶ Cross-functional success relies on their participation (OR MANDATE)

SPEAKER NARRATIVE: A good innovation management plan will be well-researched in terms of the WHY (opportunities and threats). It will describe and quantify the WHAT: the proposed changes to people, process and tools. This should include executive KPIs and ROI. The plan will also include the HOW: how innovation will capture revenue, cut costs, and how change will be managed. Finally, it will include a CAVEAT: their leadership and support will be required.


STEP 2: SUCCESS METRICS

▶ HOW DO WE MEASURE readiness?

▶ Our agility?

▶ Our flexibility?

▶ Our ability to foresee?

▶ Executive acceptance Or support?

▶ Employee participation?

SPEAKER NARRATIVE: We need metrics to let us inow if we’re winning, Charlie Sheen-style. First, readiness. What’s the % of employees who have received training and tools? Agility: how many departments are using agile practices on their projects? Flexibility: formal processes set up to foster innovation, or number of projects with assigned sponsors. Foresight: # of ideas in the pipeline. Executive: # of executives who have received training in innovation practice. % of resources dedicated to R&D. Employees: # of ideas submitted by employees. # of patents filed.


Step 3: IDENTIFY THREATS

▶ WATCH FOR specific threats to the business▶Build these into your innovation management plan

▶Be sure to look outside your category

SPEAKER NARRATIVE: You need a bit of precognition as well as a good research “muscle” to look for and identify threats to your business. As you find them, build them into your management plan. And be sure to look outside your category. You’d be surprised the places from which competitive threats emerge.


Step 4: LOOK WHERE NO ONE ELSE IS LOOKING

▶ Consider non-core areas of the business, by-products or non-monetized services

▶ Look for customer value, customer experience improvement, or convenience

SPEAKER NARRATIVE: One common mistake is to look only at the commonly accepted core areas of the business. What if a by-product of the production process can be turned into a revenue stream? Or a common service can be spun off or monetized?


Step 5: create a culture of risk-taking and experimen-tation

▶ Employee encouragement▶ Innovation jams

▶ TIP: Always tie opportunity to bosses’ KPIs

▶ Google: 10% of employees time is used to create new products. ▶ OUTPUT: Project Fi

▶ 3M: 35% of company revenues come from products from the last four years!

SPEAKER NARRATIVE: Employees need to know that experimentation and risk-taking are seen as Good Things by the executive team. Employees have a natural aversion to being a change agent – especially in this economy. Another tip: always tie the culture change to executive KPIs. For example, I lead cross-functional workshops in which we identify the leadership team’s top three things that will get them their bonus this year. Not surprisingly, a lot of projects get the green light when the executive team is making progress toward their own KPIs.


Step 6: create a culture of AGILITY

▶ ONE that can change agilely with conditions

▶ Give cross-functional bodies autonomy, responsibilities, and BASIC governance

▶ Consider Quarterly personal goal setting with six sprints per quarter

▶ Align frequency with other teams

SPEAKER NARRATIVE: You can’t just be more risky, you have to be agile. This works best when individual departments, who have their own KPIs, are allowed to have some autonomy, within basic governance models. Last year my team launched a social media ROI software platform. Each employee was given quarterly personal goals, with performance sprints over two-week periods. We also aligned our sprints with development and project management, so that we all examined our performance openly. No surprises. No fire drills.


STEP 7:IMPROVE OUTPUT BY RETHINKING PROCESSES AND TOOLS

▶ Ensure the team helps examine and update processES

▶ Get their buy-in on their duties and accountability

▶ Look for tools to manage and reinforce process

SPEAKER NARRATIVE: Taking a fresh look at processes and tools can provide huge efficiencies. For our social ROI platform, we let the software, sales and project management teams create their own processes and choose its own tools (which ended up being Jira, product wikis and Pipedrive). By doing so, we were able to go to market in less than five months, using people spread across 13 timezones with two-week-long sprints. And the product inspired several million euros worth of revenue in the first year of sales.


STEP 8:empower team to choose theirtoolsets

▶ Choice is critical for adoption▶ Not necessarily approved by

I.T.

▶ You may have to ask forgiveness

▶ Ex. Slack, trello, Evernote

▶ Adoption requires constant reinforcement

▶ Tie to staff kpis & PERFORMANCE MEASUREMENT

SPEAKER NARRATIVE: Teams and toolsets deserve their own step. It’s critical that the team chooses the tool sets that they prefer to work with. They may not be officially sanctioned by IT. You may have to ask forgiveness or build a business case. But the team must have a set of tools that don’t get in the way of innovation.

Adoption requires constant reinforcement. You’ll need to shepherd the project, the team and anything they need to succeed. And finally, to insure success, tie your staff’s KPIs to their learning and progress with the new tools.


STEP 9: Question (and test) everything

▶ Challenge assumptions that supported your prior success

▶ stress-test the ways in which you deliver value to customers

SPEAKER NARRATIVE: One thing that’s important to remember: commonly-held assumptions often prevent innovation. Be sure to challenge EVERYTHING you know about your current business model and products. And as you think about delivering value to customers, stress-test each concept. An innovation that can’t survive simple tests is something you shouldn’t try to sell to management, or bring to market.


STEP 10:provide constant feedback & communi-cation

▶ Create communication plans for employees & management▶ Innovation updates

▶ Success stories

▶ “Real” value (revenue, cost-cutting, competitive advantage, talent transformation)

SPEAKER NARRATIVE: Finally, constant feedback and communication, to your management and to employees, is absolutely essential. Provide regular “innovation updates” and celebrate team wins. Put them in the context of what the CFO would be interested in: top-line revenue, cost-cutting, market share, and talent.


Innovation Example:

Jack in the Box

▶ 9th largest fast food chain in U.S.

▶ Merged marketing, R&D, test kitchens & consumer research into a 6500M2 innovation centre

▶ Reduced energy, improved workflow

▶ Reduced costs 4-6% below CATEGORY LEADERS

SPEAKER NARRATIVE: Every penny of the construction was analyzed for contribution to company profit. Menus, menu boards, franchisee acceptance, all tested here. Ideas developed dropped overall food & beverage costs 4% lower than Wendy’s and 6% lower than McDonalds. First to roll out instore kiosks to reduce wait times and get orders exact. Created a butter toaster to spread butter on buns as they toast.


Innovative Example:Reverend Nat’s Hopped cider

SPEAKER NARRATIVE: Introduced in 2013, this hopped cider is unique: an American cider with Belgian yeasts, flavored with apricot juice, and dry-hopped.


Brand extensions: SUJA - From juice to flavored water

SPEAKER NARRATIVE: In December, San Diego-based Suja moved into the flavored water market with a new line of probiotic-enhanced waters made from organic fruits, veggies, and spices, opening up new revenue streams via new audiences and markets.


Innovative branding: heineken“subway symphony” and “bay lights” Installations

SPEAKER NARRATIVE: Heineken made a huge splash one year ago with its Subway Symphony, in which NYC subway turnstiles played musical notes as people swiped their transit passes, creating dynamic musical tunes, each one unique for each subway station. In December, it sponsored an LED lighting system on the San Francisco bay bridge. These go so far beyond traditional signage or outbound marketing efforts and create a real “wow” moment with consumers.


DISTRIBUTION:Drizly – “amazon prime now” meets local liquor store

SPEAKER NARRATIVE: Originally launched in 2012, Drizly is finally getting wider acceptance of its one-hour from click to doorbell alcohol delivery service. In the last month, the app rolled out service to a total of 18 US markets and 1 in Canada. Consumers get extreme convenience, retailers get potential net uptick in online sales.


Supplier-driven: Ganedenprobiotics providing 22500€to startups to create new probiotic products

SPEAKER NARRATIVE: And innovation in the beverage category isn’t just coming from the industry. Sometimes it’s supplier-driven. Probiotics producer Ganeden launched an innovation sponsorship program aimed at helping startups create new probiotic products. The winner of this contest of product ideas receives 22500€ in funding along with guidance and expertise to launch their new product.


SOCIAL GOOD: waiakea hawaiianvolcanic water Promotion donates 1300 liters of water for every 1 liter sold

(sustainable production & rPeTBottles)

SPEAKER NARRATIVE: Waiakea Hawaiian Volcanic Water normally donates 650 liters of water for every liter sold online. This past December, they doubled their contribution, building wells and bringing clean water to the people of Malawi. My wife and I have helped build wells in South Sudan, so this effort really struck me on a personal level as innovative and meaningful.


PSST! innovation doesn’t have to be huge to pay off

▶ 72% of visitors expect you to have a mobile site▶ If you have one, 67% are more

likely to convert▶ 61% will leave immediately if

it’s not

▶ A half-second Delay on an e-comm site reduces conversions by 20%▶ Amazon estimates a one second

delay could cost them $1.6 BILLION ANNUALLY!

SOURCES: FAST COMPANY, 2012,GOOGLE, 2015

SPEAKER NARRATIVE: I’ve shared all these big innovations, but you can be a super-hero of innovation with small, easy steps as well. Larger firms will have talented, expert web teams who are already on top of this. But it bears mentioning, because this is real money. Building the business case and innovating with your web team just on this issue could create a significant impact on the company’s bottom line. YOU will be a superhero.


We’re in the best period for innovation…in years!

▶ Many of you already have large customer bases

▶ If you’re working with millennials, they’re already digitally savvy

▶ R&D and Innovation budgets are easier to propose than ever▶ 6% increase YOY

▶Have increased 50% from 2007-2012

SOURCE: CISCO, “DIGITAL VORTEX” REPORT, 2015


summary

▶ Don’t just think of marketing innovation

▶ Consider the five horsemen and start with a strong case for management▶ Require THEIR support!

▶ Build holistic organizational metrics into your plan

▶ Give your effort constant care and feeding!

SPEAKER NARRATIVE: In summary, don’t just think of innovation as being in the province of Marketing. It’s so much more powerful when it’s cross-functional. Consider my five horsemen analogy and start with a strong business case for the management team. Make it THEIR idea and tie it to THEIR KPIs, and then ask for their support. Build holistic metrics that measure agility, speed, readiness, management support, infrastructure and process. Finally, don’t forget that you will need to shepherd this change yourself, nurturing it, supporting it and providing constant communication to both staff and your C-team.

ABOUT US

Precog DigitalWe are a digital transformation consultancy focused on advancing our clients’ digital maturity.

We provide clarity in digital strategy and options, fill digital skills’ gaps, and guide the organisational change required to survive disruption.

50 years’ combined experience transforming global brands

Offices in Toronto and Seattle

WHAT WE DO

Transform your Digital Now. Accelerate your Digital Future.

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DIGITAL TROUBLESHOOTING

COMPETITIVE ADVANTAGE

CUSTOMER EXPERIENCE

TALENT &TRANSFORMATION

FUTUREPROOFING

SSCCRRAATTCCHH IITTCCHHEESS

Vendor management; process improvement;

digital strategies; measurement & KPIs

TTAAKKEE BBAACCKK LLOOSSTT GGRROOUUNNDDCompetitive audits; Internal & external

strategies; storytelling; automation

SSTTRREENNGGTTHHEENN TTHHEE BBOONNDD

Engagement strategies; CX strategies; agile content creation;

customer data architecture

GGRROOWW CCAAPPAABBIILLIITTIIEESS

Agency transformation; retained talent search; interim Chief Digital

Officer

AANNTTIICCIIPPAATTEE RRIISSKKSS

Crowd & On-Demand economy;

emerging tech; enterprise

futureproofing

Some of the brands we’ve transformed

Experience


SEAN MOFFITTPartner (Toronto)

+1 416 458 2818

[email protected]

Former CMO, Labatts, Heineken

Former P&G brand manager

Author of “Wikibrands”

#1 digital thought leader in Canada

“OMG, are you Matt Damon?”

EERRIICC WWEEAAVVEERRPartner (Seattle)

+1 206 234 9328

[email protected]

Former Chief Social Officer for IPG Mediabrands

Former AKQA, Possible, Y&R, DDB, Edelman Digital

80 major brands over 26 years

Irish/Japanese uber-nerd


ERIC WEAVERMANAGING DIRECTORPRECOG DIGITAL

SEATTLE & TORONTO

(COMING SOON TO STOCKHOLM!)

slideshare.net/weave

[email protected]

+44 20 3289 3283

VIELEN DANK!

the five horsemen of digital disruption

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