How Digital Has Changed Manufacturing Companies Relationships With Their Customers

We are all witnessing a big shift in digital,, and it’s making many manufacturing companies across many disciplines very uncomfortable. The uncomfortable aspect comes from the understanding that how they sell their products is changing, and changing in a big way that they might not be ready for.

The traditional way of working with other businesses to distribute their products, is moving towards selling directly to the consumer. And this shift requires a big restructuring on how the company operates.

It’s deeply impacting marketing, sales & operations. Marketing can’t simply produce marketing materials and expect to see growth. Manufacturing companies need to get good at growth via Digital.

Now, here’s where it gets interesting. Telling a manufacturer, who is good at manufacturing physical products, to become experts at growth using digital products and marketing, is a stretch for many.

Create an innovation team to focus on digital experiments.

You’re not going to change the company overnight. It will take many years, and we highly recommend against going the big bang approach when it comes to digital transformation.

Step 1: Create a formal innovation program. Assign a leader to lead this program. In many cases, it makes sense to hire externally for this position. You don’t want this person to be tied down by legacy processes or thinking. Give the program a name and communicate to the organization the goals of the program.

Step 2: Identify 3-5 critical pain points for your customers  -- This can be done through an employee survey or an executive brainstorming session. The important thing is that you identify what pain points you’re looking to solve.

Step 3: Identify potential digital solutions and classify them as “experiments” -- Traditionally, organizations deliver software and deliver them to the market expecting it to work or make big waves on launch. Times have changed, and the understanding from many leading organizations is that by treating each new digital initiative as an experiment gives the team running the experiment some wiggle room to adjust without all the pressure to succeed.

We like to start with 3 potential solutions to go to market with, and also include one idea that seems far off base and different than what you would normally pursue.

Execute the ideas under the “innovation team” umbrella

Remember, we’re still in experimentation mode. This is the startup way of looking at it. The goal from the execution of these ideas is to bring them to market and “test” them. If the test works, invest more. If the test doesn't work, document your lessons learned, store them in a central depository, dismantle the team, and move on to the next idea.

Few things to make this work:

  1. The team(s) executing these ideas need the right resources and full-time commitment to executing these ideas. If it’s treated as a side project, it will be treated as a lower priority. Assign resources that are fully dedicated to bringing these new digital ideas to market.

  2. Give the capital (and resources) needed to execute each experiment. We like to think in a 3-tier system. First tier gets a limited amount of capital and resources to test the idea. Second tier are for experiments that are validated, and then more money and resources are given to continue to bring this to market and test. The third tier is when the idea has “graduated” because it has been validated as an initiative that should be a core product within the organization.

Place a big focus on owning the experience end to end.

I strongly believe that many industries are going directly to consumers. This is why you see companies like Shopify growing like crazy, because shopify makes it easy for anyone to create an online store and sell directly to a customer. It handles payments, and is getting into distribution and logistics as well. But, most importantly, it allows each store owner to own their experience end to end.

Selling your products to a few companies, and expecting them to handle the sales and marketing is a recipe for disaster. 

Questions to ask yourself:

  • If our selling partners and distributors disappeared, what would happen to our business? How would we mitigate that?

  • What new, personalized experiences could we give to our customers that we couldn’t with our current distribution partners?

  • How would owning a relationship directly with the customer impact our margins? Would it increase or decrease?

  • If we owned the relationship with the customer, what other new services or products could we offer them that we couldn’t do before?

The digital shift should be viewed as an opportunity not a threat. Invest in Digital today.

It’s not time to panic. It’s time to start experimenting. Start proving that new digital technology platforms could help your business thrive. Going digital is not a defensive strategy, it’s an offensive approach. 

Create your innovation program, give adequate resources and capital towards your digital experiments, and get to market. You’ll be surprised by the results.