This week Andy & Brian talk about:

– StitchFix’s perplexing decision to open a digital transformation office

– The concept of a “post-digital enterprise”

– How much you need to budget for change management during a digital transformation

Brian Beck: Welcome to Friday 15, everyone. I’m Brian Beck. Welcome to Friday 15 with Master B2B. Andy, welcome. And Andy, as always, have some awesome breaking news for everyone. Let’s go ahead and jump right into that. Thank you and congratulations to our friends at MDM Tom Gale and his crew. They just, Andy, sold the company. Whoa, that’s great. MDM for those you don’t know is a research and media company that publishes all about distribution even in business, I think Andy 35 years, something like that, long time. – Yep. – So they’re required by the NAW. And what should you take on this? I mean, when a company like MDM which again, it has a publication it’s a, people follow their news. When they get bought by an organization like NAW what does that mean? Do they continue to be independent? Or how does this all work? What do you think?

Andy Hoar: That’s a big question. I mean, there’s probably good and bad about this. The good is that it’s gonna give a voice to wholesales and wholesalers, resellers, distributors on a larger scale. But, there’s probably this temptation over time to turn this into kind of a PR organization for, or PR arm for NAW. So hopefully they’ll avoid that temptation and just the good part, not the bad part, but we’ll see. But yeah, congratulations to Tom and his crew on this one.

Brian Beck: Yeah, yeah, it’s always I love to see this one. It happens to the good guys, right? Like Tom and MDM has been a partner of ours at Master B2B in terms of socializing some of our activities and being a good, you know, kind of thought leadership partner. So congrats to Tom and MDM. So Andy, today we’re gonna talk about this question which is a big question, right? I mean, it’s, when is digital transformation complete? Ever ongoing? We asked our community, we’ll reveal the LinkedIn poll later. But what started all this was an article from our sort of our stalwart of research and just market intelligence, Mr. Jared Blank. Thank you, Jared. He said this is article this week, Andy. Talk about Stitchfix. Okay, so what is Stitchfix, right? What, describe the business?

Andy Hoar: Well, it’s a business where you basically discover brands. You pay $20 a month, I think it is. They send you a box of fashion items that have been curated by their experts. Sounds like a perfectly reasonable concept, especially during the pandemic. But, you know, they struggled of late probably because the pandemic is gone. And if you wanna discover a brand you can discover that directly through the brand itself through the B2C site and/or social media. So Stitchfix is really struggling with a business model issue. Not surprisingly, there’s, there are revenues declined, their stock is going down. And it usually means they’re replacing the senior management, which they did. Sadly, one of the first things he did, and that’s what we wanted to talk about, was he created a transformation office and put somebody who was in charge of strategy at Stitchfix in charge of the transformation office which kind of begs the question. – What did , they hired him for. – The first one in charge of the strategy before. Why is this person in charge of the transformation to a new strategy? What was this person doing before? And not to be critical, but that just on its face seemed odd to me. But we wanted to talk about this because we see this temptation over and over and over again by the c suite. Now, this is a B2C example. We’re trying to prevent it from happening in B2B where companies, they bring somebody new in and then they try to outsource transformation, business, in general, digital, doesn’t matter. And that’s exactly what the CEO did here. And it’s like, I’m shaking my head as you like, what are these people thinking? This never actually works.

Brian Beck: Well, then how do you how do you digitally transform a digitally native business?

Andy Hoar: Yeah, that’s another interesting question. (laughing)

Brian Beck: And we’ll get to some interesting stats coming up here in just a moment from some study that McKinsey did around this. I mean, look, at the end of the day, we’ve said it for a long time, Andy. The digital function transformation of a business the CEO is the digital officer. That person, him or her, they need to be leading this. And it’s, anyway, but so, so this is kind of yeah, you can’t delegate this stuff and it won’t work.

Andy Hoar: It doesn’t work. It just doesn’t work. Period. And it’s like, you know, these come from some steering committees and taskforces. But to gather information, fine. But the part I always struggle with here is, why would this guy, he came from Macy’s, right? He’s a chief digital officer at Macy’s. And he may have done a fine job there but they put in charge of Stitch fix. Did they put him in charge because he should know what he’s doing? I mean, why do you have to set up an office of transformation? Staffing with people from the existing company who apparently didn’t do well. When, to me, it feels like a delay tactic. It feels like kind of excuse making. And it feels like, I just want to borrow like six to nine months to figure out what I’m going to do next. And that might just appease the market. But look, we’ve got to be smarter than that. That just doesn’t feel like a real move. –

Brian Beck: Yeah, yeah, no exactly. So we wanted to look at this. So we got to talking about it earlier this week and based on this article. So we wanted to ask the question, digital transformation. Is it ever done or is there a point at which you can say, okay, I’m at a point where I’ve got everything in place and can I move on to executing as a digital first company? This is the way McKinsey, they released a book last year and “Rewired”. I haven’t read the whole book, but we read it. I read, I think he read some, just some excerpts and summaries of what they’re talking about here. This is how they define it. Digital transformation is the fundamental rewiring of how an organization operates. The goal of a digital transformation should be to build a competitive advantage by continuously deploying tech at scale to improve customer experiences and lower costs. Okay, fine, but my reaction to that definition is, is it really about tech? Is that really the core of this? I don’t know, Andy, and you pulled out some interesting stuff too. What do you think?

Andy Hoar: Yeah, I think that is where they anchor too much in this definition. They have to, tech is what’s driving a lot of this stuff because it’s really about customer behavior changing, but that’s also driven by technology because people carry mobile phones around using social media. So technology is really the thread that runs through all this on both sides of the equation. So I get why they talk about it, but I think you and I also believe that technology is the means to the end, not the end in and of itself. And so really, and I think it’s as interesting because they actually say in the same book I took this quote out, that as a rule of thumb, for every dollar you spend on developing a digital solution, which is technology, plan to spend at least another dollar in implementing process changes, user training, and change management initiatives. So this is as much about change management, perhaps more than is about technology.

Brian Beck: I’d argue it’s more. Yeah, I think obviously you need a foundation, a technology foundation, which is using some commonly used buzzwords, agile and flexible, right? But you need to be able to and they say this in the book as well, you need to have enough ability for the business user to create change and meet customer demands, and flexibly do that without having to put a massive project in place that takes a year to implement because your IT team has to do this and that and all the rest. So there is a real practical notion of flexibility that’s behind this, but I do think it takes, that’s fine, that’s a capability. It goes beyond that, it’s the mindset, in my opinion, it’s the mindset and it’s the change in thinking, and we’ll give an example later of a company that I think really embodies that mindset and the organizational approach, because I think that’s really the core of transformation. The technologies are there, the tools are there, the foundation and best practices are there, it’s really getting to the point where you can execute as a digital person which to me today means customer first organization.

Andy Hoar: Well, I think so. Yeah, and I think you can break up the process into stages and you can reach certain milestones. That’s not a surrender to the idea that it’s a beginning and end but there is no beginning and end because technology will continue to evolve, customer behavior will continue to evolve, a competitive landscape drives change constantly. And so the reality is digital transformation like all transformation, every business is constantly transforming. Every day they wake up and they’re slightly different in some form or fashion. So to argue that transformation is a process that comes to an end at some point, it’s just kind of crazy.

Brian Beck: It is, but without some kind of framework then you end up, you don’t know where you’re going, what to do. And so quite selfishly and self-promotingly in my book, Billion Dollar B2B Ecommerce for those you listening on our podcast I’m sharing a sort of a stages of digital evolution framework. And so I think it’s helpful. And we did this too last year, Andy where we have sort of the stages of maturity. We’ll talk about that in a minute. But I think it’s helpful for companies. How do you take this nebulous concept of transformation and break it down into something you can actually act on and do? So that’s kind of the notion here. And one of my posits in the book or one of my suggestions is, let’s get through these stages and have some tactical things we can do to get through these stages. And well, digital transformation as a concept is never done. Do you reach this stage and Andy, you coined this term of being sort of a “post-digital enterprise”? We joke, what does that mean? Well, it means you have enough of the foundation in place which includes tech. But it all, importantly, includes your organizational alignment to really start opening up new value for the business. So in these stages, I’ve got five listed here going from “no digital presence” all the way through some online content sites, to selling in eCommerce commerce. Look, selling eCommerce these days is table stakes. You have to, if you’re transforming you can even start to think yourself as transformed if you don’t have eCommerce. But getting to further future stages, like a stage four which is aligned selling channels, being truly omnichannel your sales team is fully aligned with eCommerce. They’re working together. The customers are enabled to self-service tools. You have mobile, obviously, advanced mobile capabilities. You’re starting to bring AI into the business. Five is where this final stage here in my framework, you’re a digitally transformed organization. And that means, really, your organization is thinking customer first and thinking through a digital lens because that’s how your customer thinks these days. Anyway, any thoughts on this, Andy?

Andy Hoar: Yeah, I think you do cross a chasm at some point where you are fundamentally different. Some people like to use the percentage of total sales that are digital sales as a proxy for this. Like, if you cross over say 50%, meaning more than 50% of your sales are driven by the directly or indirectly online then you’re no longer an offline centric company. You’re more of an online centric company. But digital is a more complicated than that. And I think you could be a demand side online driven business, and still be a supply side offline driven business. The digital hasn’t come to the supply chain, for example or the opposite. I’ve seen companies where digital is really heavy in the supply chain. They’ve upgraded everything there. They can track orders, et cetera, but they’re still using sales reps and call centers and will call windows to actually front the company. So to me, it runs across the entire spectrum. But I, yeah, obviously agree with this. And we have our own framework, too, that we developed through Master B2B. Yeah. Let’s talk about that. Yeah. And it enables you to identify where you are in the journey. I think that’s the most important part here. It’s about identifying, honestly, and objectively, where are you? Are you in a stage one? Are you in a stage four? We have four different dimensions. We looked at like digital tools and culture, data and insights. The various things we looked at, you can be a stage one company or a stage four company for each one of those dimensions. And what’s really critical is you’ve got to figure out where you are with each one. You might be a stage three digital tools company. I mean, you bought the tools, but you might be a stage one culture company, which means you can’t even use the tools you bought.

Brian Beck: That’s right. So we had this thing we released last year called “Establishing your baseline assessing your digital maturity.” You can go to our website, masterb2b.com, and to the resources section. You’ll find it there. And you could actually score yourself. So, and what was interesting, you know, score where you are, was interesting about this process, Andy, is, you know, we found that, you know when we looked at digital maturity, it wasn’t just about one element like, you know, it wasn’t just about tech. We had to look at all the different elements. And in interviewing, we interviewed a bunch of people. We’re going to do more work on this this year, this concept where we’re going to talk about how do you advance yourself from one stage to the next. So there’s a lot in here. We encourage you to go to our site and check it out. And does that mean, you know, digital transformation when you get to the, you know, in our model stage four you know, are you done? No. But at least, you know, you have some guidance and tactical things you can be doing to advance the business. And hey, maybe that’s what StitchFix is doing. Maybe they’re downloading our model, Andy, and using it.

Andy Hoar: Yeah. Maybe that.

Brian Beck: So, you know, this is, so a concept that I’d like to share with the group here is, you know, looking at what we would argue is probably the most digitally transformed or centric company on the planet, Amazon. And, you know, how do they, how do they think about being a digital or customer first company you know, Jeff Bezos, the former CEO and founder said you know, he has his concept of day one and day two. And we’re always going to be a day one company which means acting like a startup. And he says, you know, day two is stasis followed by irrelevance followed by excruciating painful decline and death. And that’s why it’s always day one and Amazon. And what’s interesting here is he points out how do they stay a day one company? How do they act like a startup? Well, they require their employees to do four things. Be obsessed with the customer, focus on results over process, make high quality decisions quickly and without perfect information, right? And embracing external trends quickly. What’s not here? Technology, right? Okay, well, technology supports all this. But from their point of view, it’s all about the culture and the decision making and the process. It’s not about the other stuff. So, you know, I think there’s a lot our B2B folks can learn from this, Andy. Any thoughts?

Andy Hoar: Well, one big thing that’s embedded in all of this and is arguably the most important thing that’s not explicitly called out is data. You can’t do anything without data. You can’t be obsessed with the customers. We don’t know what they’re interested in. You can’t progress on results if you don’t have data. You can’t make high quality decisions when you’re making it based on, you know, your gut feel and trends are all driven by data. So, you know, Amazon and a lot of digitally transformed companies are really at their core powerful data companies which is what we always say to everybody in B2B – before you spend a ton of time doing anything really, you need to audit and triage your data and understand what you have. Because you can have the most talented people in the world, the best technology in the world. But if your data is crap, you’re not going to get very far.

Brian Beck: Yes, that’s right. Yeah, we emphasize that. And that’s the subject of a lot of our upcoming events. So we asked our community on LinkedIn. Is digital transformation ever finished at B2B companies allowing firms to move on and execute as a digital first company? Overwhelmingly, our audience said, no, never done. 91%. Thank God. [LAUGHS] Right? It’s true, right? And I’m curious, you know, those who think there’s a finish line – where is it?

Andy Hoar: Well, 91 said, no, you’re never done which is the correct answer. 9% said, yes, I’d be curious. What do they mean by that? Maybe it’s a matter of interpretation but I was surprised even 9% said there’s a finish line. But again, the finish line may be the end of a milestone, for example, but you’re never done with this.