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Welcome to Unpacking the Digital Shelf where we explore brand manufacturing in the digital age.
Hey everyone. Peter Crosby here from the Digital Shelf Institute. The first 10 years of the Digital Shelf was about standing a program up on the side seeing what would come of it. Now we know, and it's the main growth driver of virtually every brand. So now the way we operate, it must mature to be a profitable, reliable, measurable part of the business. That's why Chris Perry, Chief Learning Officer, and Oskar Kaszubski, Chief Growth Officer at commerce education and change management consultancy firstmovr shared the 2023 edition of their SHEARED report with Lauren Livak and me. It's entitled, wait for it, Going Corporate Commando in the Clash for Commerce. So get ready for some fresh advice for moving yourself along the commerce maturity curve. So Chris and Oskar, welcome to the DSI Podcast. As you know, we love chatting with firstmovr about best practices and the great knowledge you guys share. So thank you so much.
Thank you for having us.
Yeah, thank you.
You put out the second version of your SHEARED report and we covered it on the podcast last year and we're delighted and it was brilliant, see what I did there, and really hones in on a lot of the challenges that brands are having today. I got to say, I never thought I would use the phrase going commando on the podcast, but when a report is titled Going Corporate Commando, I really kind of have no choice. So thank you for that. Now, I don't know if we have to put an explicit tag on this podcast, which I love doing so. We'll see. But seriously, the new report is both delightful in tone and fresh in creativity, but most importantly, an impactful gathering of some tough love and some smart advice for brands that want to progress in commerce. So Chris, give us sort of the top line. What stood out for you since you last shared the last report with us?
Yeah. The first one last year was really kind of setting the scene. And again, we don't have all the answers. Obviously we're not better than anyone else. We would've been in the same boat, a lot of us. But as a practitioner, when you leave practitioner roles and can look back at the rest of the world, you can kind of see things that everybody else can't see. We might be in the snow globe and we're looking in and we can see some of the realities that maybe we've all realized, but we wanted, as you said, to say it in a way that wasn't pointing fingers but made it a little bit funny, but yet also a reality that we might be able to adjust and that we can control our own destiny out of.
The first iteration of SHEARED was really about highlighting this imperative of e-commerce and its influence on the world. And then highlight the bad behaviors, as you were going with our sheep theme, that were keeping us from moving forward. And then walking through the eight factors of change that would help enable e-commerce or whatever next change.
The second iteration builds on that because, again, the formula for change didn't change. It's still true. But we have seen a lot of progress from different benchmarking reports, our own work with brands and our trainings and consulting projects, just talking to a lot of our friends and peers in this space. We're seeing a lot of progress, but at the same time, we're not seeing enough. And I don't say that to grade anybody out there. Everyone that's leading change is working really hard. But once again, it's not the first movers that are necessarily the challenge. They're trying to bring the rest of the organization along and trying to get everybody on the arc. And not everybody thinks that we board the arc today. We have to because 2023 is going to be a very challenging year as we're now trying to comp very high growth years, the last few years off of Covid, as inflation and other challenges hit the market.
What this report really identified was that progress. But the two big barriers really still holding us back, and then I'll say expansion on some of those strategies that we can take. And just to highlight those barriers because I think if you name them, you can go solve them. It's one barrier, but two parts. It's measurement, and now that we have a lot more data available and the right metrics that we can name by holding ourselves accountable to the right metrics that would lead to the right changes, we can be accountable and actually pivot large organizations. Easy to say, but take some steps to do. But within measurement, we also kind of came up with this word called measurement, meaning me measuring myself.
This is a reality for all leaders, this is an opportunity for us to all stay humble, us included. Everyone is how they measure themselves or how they are measured. We are what we measure, we are what we do. And one of the challenges today is that traditional leaders who kind of, I want to say avoided omni and e-comm, maybe not on purpose, but avoided it because it wasn't their job, have kind of stayed in a harbor. They kind of stayed safe in this harbor, not sailing the seven seas of tumultuousness that was out there disrupting. The problem is we need their expertise and their maturity applied to this tumultuous sea coming at us that takes all of us to win. But they haven't been practiced as sailors navigating those seas.
The e-comm people, the digital people have been navigating those seas. But the challenge is they were getting really good over the last decade, managing storytelling, managing ambiguity, building the early foundational steps for how to win in e-commerce. But now that it's starting to mature, they haven't necessarily practiced. They didn't have expertise over the last 5-10 years in that more mature business. So this is an opportunity for us all to come together and bring the different tools and capabilities and skills we all complement each other on, but to try to overcome any vanity. Right?
I don't say that to blame people, but everybody has an ego and we've, a lot of people in e-commerce have become thought leaders and that's good, but you need to also be action leaders. We actually need to be practitioners again. So we actually know how to sail those seven seas. I only say that because in hindsight, I probably could have told my former self to do the same and I'd want someone telling me that now if I was at the helm of a ship trying to drive that change. So measurement is an opportunity, by getting the right metrics, we can all break through ego and inefficiency and try to drive e-commerce and whatever comes next.
So in the first report, you talked about the eight factors of change that go into this and in this report, you revisited them. So we don't have time to go through all eight. So check out the report, everyone. We will talk about the link at the end of the podcast, but let's talk about organizational enablement. Oskar, what have you seen really kind of shift with organizational enablement this year?
There are a few issues. Number one issue is not only to e-commerce, we also have AI now coming into default. So the challenge that we actually have is that in terms of the change management, we almost have to make a double jump. I think the organization need to understand this, that this is the time where we even us on the call, we need to upscale. So we need to really understand how to enable the entire organization to help them to go from regular world to AI power world. And think about it, this is not any different when it actually happened about, I would say, probably beginning of nineties when we actually were introducing computers into the workforce. People were used to writing with a pen and paper, going to the meetings, building big presentation, maybe some projector slides on a paper, et cetera. Now we are actually going into very AI specific world where we need to reconcile almost where do we spend our time? How do we use the technology to be able to advance us what we are doing on everyday basis?
I think it's critical for the organization to recognize that this change fundamentally is no longer only about the e-commerce people. It's a change that can actually impact the entire organization. So that's why we need to spend time to understand this. How do we actually function in this new world? What we are actually hearing from a lot of people at the moment is that a lot of the legal and compliance team, they just want to ban the AI. It's like you can't use AI to create content. Versus trying to figure out is how really to make this work to benefit the organization? Because we know e-commerce throughout its journey, it has been always about new ones over time because e-commerce is maturing.
That's why I think a lot of the leaders of the past of e-commerce, they really need to spend time and look at the details. And I think AI can help us to scale up some of those details. It is possible now not only to focus on the priority skills, but you can actually build the entire algorithm for the entire portfolio, so you can actually elevate almost the minimum viable product of e-commerce up. So I think fundamentally this is something that we can actually push forward as a narrative within the organization, but we have to be open-minded to it. The same way as we had to be open-minded about e-commerce, the same way as we had to be open-minded about computers in the workforce.
What I love about it is just so much is happening so quick. ChatGPT literally came up in November. Now we have Microsoft trying to one up with the Bing integration, which by the way, I highly recommend go to Bing and see their integration with OpenAI. It's wonderful because it's trying to actually ease people in it. Then of course, Google yesterday announced another product, kind of a competitor [inaudible 00:10:32]. So it's interesting. So much is happening so quickly, which that's what's actually fascinating for us.
But the other thing I would want to also say is this is a time where we actually have to make sure that everybody's accountable for the growth. We actually probably should, because where we are within our journey, put learning objectives in people's goals for this year because there's just so much change so quickly. People need to really spend time to understand this, what I'm doing on everyday basis really beneficial or can I use technology to actually do it? It's almost like an organizational reshuffle in terms of the goals where we have to align everything together, which I think that's what that change is really exciting for us. I'm still thinking this is a new paradigm. In 12 months, it might be a slightly different world versus what we are used to over the last 20 years.
And I would just add to Oskar's point, if you have the right metrics, and I know this sounds like beating a dead horse, but if we solve this measurement issue, and I'm not saying... It's a multi-dimensional approach internally. If you measure the right things for each level and each function, even if they don't have the AI tools or all the capabilities or the partners or the talent or the structure, they will be forced to go get it. That's the beauty of it. You ask somebody to do something different than they normally are doing and they might say, "I have no expertise, what do you mean?" And you'd say, "Go figure it out." That's what the e-comm team had to do 12 years ago when CPGs were building the first mini centers of excellence. They said, "You are tasked with growing this new area that we aren't going to focus on for the next five years."
And what did you do? You went to learn. There wasn't a lot of learning available at the time because no one had done it before. You saw that there were new startups that popped up to help everyone measure and run media. The measurement forced the actions. Then to Oskar's point, we actually need to double jump with actions because there's a lot of other changes, but if we have the right metric, those tools might get us those metrics faster. We saw this on LinkedIn, but somebody said, "People won't lose jobs to AI. People will lose jobs to people who know how to use AI." That's in general, people who know how to use the new tools. So it's those metrics that hold us accountable to then setting the right goals, getting the right capabilities and all of those things.
I would also add one thing. Think about it is if you want to motivate people to use AI and embrace AI, you could just say it's like, "Hey, if you figure out how to use AI and keep your productivity, your 40 hour week productivity, you can take Friday off forever." So instead of working 40 hours, you can actually work 32 hours because you know how to use technology to have the same output. You would see probably 30-40% of employees would jump on it so quick and you would have a massive, very quick adoption.
I wish Oskar would let me have Friday off.
Nah, you can't have it.
I don't know. Maybe you see problems with adoption of AI. Is that really the issue or is it just actual AI that's useful? Which is just starting to come to life. I think by the time this airs, we have a project ongoing to use ChatGPT to create product content as this starting place for brands. Product content creation over time will just be a review process rather than a start from scratch process, which could radically change the efficiency and the scale how people appear on Digital Shelf and the variety of content they're able to produce for personas and things like that. So that's super exciting.
I don't know that I see anyone sort of resisting adoption of it. I mean maybe what you're talking about is the fear that they might replace me, but there's so much value added work for human beings to do. I think the joy of having the mundane but really necessary stuff made easier, at least on the e-commerce Digital Shelf side, every practitioner I know would be like, "Thank you." So I'm hopeful that that's what they find from it. But maybe you're seeing more resistance than I am.
Is it legal and regulatory? Those two functions just kind of come to my mind in terms of e-commerce.
In terms of resisting using it at all versus-
Within the organization. Not at home.
Is that what you're seeing though, Oskar and Chris?
Yeah. So what's happening is because it's such a unknown and this is a little bit of like what you're seeing with copyrights law. Any content created by AI, what are the copyrights for it? What happens with it if it's actually using the source material? What you are seeing on ChatGTP versus, for example, the Bing implementation of OpenAI is the ChatGTP is actually not providing the sources of information versus the Bing implementation, you can actually see what the algorithm took under consideration when it was actually giving this recommendation or created that piece of work, which I honestly think this will ease a little bit in maybe the legal and regulatory team because they can actually see it's like, "Okay, the source is X, Y and Z. Maybe we need to exclude the source for whatever reasons." It could be Wikipedia, maybe they don't like what's being written about Wikipedia because there might be a slight of a bias when it comes into it.
But I do think we'll have to rewire ourselves because think about it this. What Microsoft is actually working on is integration of AI within Outlook, within Word, within Excel. So how we're actually writing emails, how we're actually creating PowerPoint decks, how we're creating creating Excels. Data analysis fundamentally can change quite a bit. And it's not going to be as easy as just asking a question, just expecting the results. There's going to be a learning curve in terms of how you actually write the query to get to the right result. And I honestly think because we are in a digital environment where we are slightly lazy, on the lazier side, we have a attention span of for seven seconds or even less. If you look at product imagery, it's probably less than a second to judge them.
It's going to be interesting to see who will actually flourish on AI, using the AI to actually push into the next limit because you still got to prompt it. It's a natural language processing. It cannot read your thoughts and know exactly what you need. So if you, for example, ask a question and you get the wrong result from the query because you didn't ask the query the right question, you're going to get frustrated with this and you're going to probably discard it. That's where I see that change management coming in. What I do think is we do need to spend time to investigate, to immerse ourselves into the new technology and to figure out how this entire ecosystem will work together.
It'll really take an analytical brain, I think, in addition to a creative one, to be able to prompt correctly, or step through the process, and the refinement of the question drives dramatically different results. It takes being able to ask the first question, look at the output and think, I wonder how I might be able... It's actually kind of a fun puzzle to work on, but it's going to take time. As you said, education is going to be an incredibly important piece of this.
I want to move on to dig in more to the measurement because really, the tough love here is that the measurement is just going to be critical to mature the business that we're in here. So Chris, I'd love you to talk a little bit more about how brands should focus in terms of delivering the smart strategy and goals that you talk about in SHEARED.
When we say smart strategies, we are not implying that anyone isn't smart. We're going back to the acronym of SMART for Specific, Measurable, Achievable, Relevant, Time bound. Because again, that's actually applied to goals in general. If you wanted to lose weight for a New Year's resolution, you'd want to set very specific timelines. You're not going to lose a hundred pounds in two days. You're going to have to set reasonable goals, achievable goals, relevant goals to you for what you can do. But what's really interesting. Again, this isn't a knock to anybody, but even in the last couple weeks, there have been a couple brands who've asked us to look at their strategy one pagers or, "This is our 2023 e-commerce or omnichannel transformation plan."
And again, all of these pieces are needed, but when you look at it, sometimes it's hard to decipher because it's a lot on a one page, but then it's like, "So what is your goal?" And they're like, "Growth." And you're like, "All right, growth isn't a goal. It's the result of a goal or of a strategy." But I realize everybody wants to invest to growth, so that's great. Okay, so what is your growth strategy? Then you'll get a number, somebody will say, "Well, 22% next year or this year." And you're like, "Well, that's how much you want to grow." And I don't say this like I knew better when we were running e-commerce either, but in hindsight you're like, "Well, that's the number, but how are you going to get it?"
Well, then you get the, "Oh, you mean what capabilities and what my pillars are." And you're like, "Yeah." And then they go, "We're going to optimize the content, or we're going to win the Digital Shelf, or we're going to optimize supply chain, or we're going to invest in retail media." And you're like, "Okay, those are levers that can earn you your goal, but they themselves aren't the SMART growth strategy."
And what I mean by this is go back... I hark back to my brand management days. I had a laminated piece of paper from IRI and/or Nielsen because we had both when I was at Reckitt during my tenure there. It told you how to diagnose your growth gaps or opportunities based on households, trips and baskets. That's the growth formula. I get new, current, lapsed. I get bigger baskets from a number of levers. I get trips from a number of levers. Those are growth goals. I want to increase my basket because I already have lots of consumers coming in and I get decent trips, but I want to expand the dollars per trip. Or I have a highly repeatable product, but it's a vitamin, but they only take it two times. They only buy two and I could increase it to 12. So I have this huge upside. So it's really thinking about those growth goals and then building blocks towards those goals, designing around the capabilities.
Content. What could I do with content to build baskets? I'm not just going to optimize my content. I'm going to do cross-selling charts and regimen images in my secondary carousel and then with my media and my promotion, I'm going to do promotions that bundle, cross brand and maybe even cross manufacturing. A lot of brands might say, "Well, I do that." But I would argue doing that with that explicit design around that goal, because a lot of brands are doing everything because they're just trying to grow. They're not trying to pick one growth goal like we used to in a very mature, slow growth brick and mortar world. That's what we did. You were a number one brand. It was about extracting as much value from the current people as possible. If you were a challenger, it was about gaining as much market share and penetration as possible.
I don't say it's easy, but if we reframe around, my pillars of growth should not be to win the shelf. Sure, I'd like to win the shelf, but I win the shelf by doing these things. And if I win my basket size and my trips and my new households, depending on which ones I go after, I will outperform others and win on the shelf. So it's just a reframe. It's just bringing that CatMan approach back to what is now a maturing space. And I think that helps us build goals we can actually achieve. And my last comment is just a lot of brands will say, "I didn't hit my goal this year, or I don't know why I hit my goal." Well, why is that? "Well, we optimize content, but I don't know what part of my content optimization did what." So if I'm designing very explicitly around those goals, I can actually see, did that drive that type of incrementality or was I more successful somewhere else and maybe I should pivot my strategy?
So it's just being "smarter" around our goals and just knowing that growth isn't the strategy, it's the result of those smart strategies.
Chris, to that point, I feel like we've... And you've said this a bit, but we've gone from the era of, "We just need data on everything," to like, "Hey, this data actually has to tell us something and get to an insight." If we think back to tying in organizational change too, are you seeing organizations build specific teams and internal functionality to collect all this data, have people actually focusing, and analyzing it and working with the teams that are creating the goals? Where I think those were in separate silos maybe a year ago.
It's a good question. And again, if you're in an organization out there that's already doing it, again, we salute you if you're already leading the charge. Because again, nobody's doing everything perfect. There are a lot of people doing really awesome things and certain areas of these factors have changed. Not everyone is doing all of them. That's the same thing even when you think of a PDP. No one has the perfect PDP. Everyone has like 90% if they're really doing well and somebody else is doing one extra thing really well. But we are seeing some teams which are now organizing, and I hate to use the word matrix, but they're matricing their business may be slightly effectively because then it becomes like, "Okay, hey, there's a retail media expertise team." In general, there's a content team, or it might be called the conversion team. So there's like a traffic team and a conversion team, and then there's the innovation in the portfolio team, which has to be baked back into e-commerce and omni ready packaging.
But at the same time, then there's a cross across. Like at Walmart, I need the nuance of how I'm translating all those things back at just Walmart. And for a category or a brand who might have a very explicit and intentional goal that isn't just all growth, but I'm a number one brand, I want to extract more value from my current shoppers. They're laced in there too. And they're thinking about how I bring... So there has to be specialty teams in that customer lifetime value equation, like traffic conversion. Maybe the basket size and trips teams honestly are more of those category teams as they think about what the strategy is for the categories.
But to your point, they're starting to come together. Maybe, again, if we have the right metrics, they might come together faster because we'd all be forced to figure out how to solve it together. But we are starting to see that. But I still see a lot of teams, not wrongly, but organized around the capability lever, like content or Digital Shelf Ops or whatever it may be called, and then retail media. And that's good. But what about the ones that bring those together holistically in a full funnel that say, "Basket is my goal. How do I do all of those things to build baskets?" And that's where we actually see some brand teams. It's almost like CatMan or brand teams starting to form or leads who bring all of those together for a category and then certain leads for key retailers that bring all those categories. To your point, it is starting to happen, but there's not one structure that's perfect, but it's those roles that I think need to be in play.
Yeah, I think that makes a ton of sense, especially from a resource standpoint and figuring out who to add on what team. And Oskar, when we think about investments across those teams, what are you seeing? Because you're talking about AI, which is great, which requires an investment. What team does that come from? Who is accounting for that? And then you have retail media and content. How are you seeing that shift in this new environment?
Well, in terms of investment, what we always talk about with our clients and our friends in the industry is to build a comprehensive plan that it's like A to Z. Don't build the plan that you know you have the data for. We've seen a lot of those strategy plans where it basically has, "Well, my net sales were this, my category was this, my margin was this," maybe few of the other P&L metrics, and that's it. That's the plan. And it's like, "Okay, but do you understand where your content is? Do you understand how many assets you have out there? Do you know how many assets are actually distributed?" That has to be in the plan, right? Do you understand your issues with availability? Availability is a massive problem for our industry just because there are so much new ones buried within the zip code level measurement of every single Kroger, Walmart, Target locations. That if you just basically scrape two, three zip codes around the country for Walmart, this is not enough. You really can uncover some interesting opportunities, and we've been actually doing some of those tests.
The other challenge, what it is, if you think about it, when it comes into actually content production, what would it take to actually have to raise minimum viable product of your entire digital set one level up? How to create a nuance for specific customers. Those plans have to be built in a very specific way that you actually understanding the nuance and you are okay if you don't have something. And the one that is blandly, which is a problem within our industry in CPGs, is retail media. Guess how many times we ask our clients to tell us, "What is your retail media budget outside of Amazon?" And then we hear crickets. "Oh, it's with the agency." "Okay, who has the spreadsheet? Who is paying the bills? Can you actually give us a little bit of a better metrics?" Nothing.
It's like we've became accustomed to rely onto our agencies that companies have a really hard time to articulate it. But what I'm basically saying is like, "Hey, let's actually build a plan, very nuanced plan end to end. And if we actually don't have the data, we can then identify this is our priority." Let's actually go after our retail media budget data for Walmart, for Kroger, for Target, and to be able to extract this and be able to say, "What are some of the metrics that we need to do?" So that's one aspect.
The other one is that we see over and over again is that people build a plan for themselves. But this is a wonderful vision of trying to apply to a job for a company, assuming that you are the only one candidate. So this whole notion of really understanding, what are my key competitors doing? What type of strategies they are employing? What are some of the gaps that they have that I could explore and actually take advantage of? We cannot just be building strategy plans end to end and being able to have enough of a nuanced granularity for growth just by looking at ourselves. We almost have to really have a good kind of understanding where the competition is, what potential weaknesses we could actually explore that they do have.
It's interesting because we as e-commerce leaders, as digital commerce leaders, we are basically not used to being in a mature business. And that's why that mature business, it's very clear that you have to, almost like when you go back to the SHEARED, you have to address the eight factors of change. You cannot just select one out of eight factors of change. You got to address all of them. I think from that perspective, the key what it is you almost have to have unfortunately like a checklist. When you're actually flying a 747 or Dreamliner, go through your checklist and make sure you actually address every single thing to set yourself for success, because otherwise you're going to miss one. And guess what? You might actually not be able to deliver your plan.
And 2023 is a very tricky year. We've seen a lot of companies that are actually calling down their growth numbers. Their categories are shrinking. They are not meeting their sales budget because, to Chris's point of view, they just had a random, "Let's grow 40%." What we got away just few years ago is not necessarily what we can actually get away at the moment. That's why I think that granularity is super important.
Yeah, I think the idea of the Digital Shelf maturity curve, and that's only a piece of the puzzle. You talked about so many other factors. But this is the time where... Test and learning is always an important part, but the side gig of e-commerce is now front and center to almost every brand's growth strategy. That maturity is going to be super important. And gentlemen, just thank you so much. We just talked about a few of the things in the report. There are eight factors of change, and I think it's such a great piece to pull that together and allow companies that are still evolving their strategy and feeling that desire to move into a more mature state. It's a great guide for that. You folks should download it. It's at firstmovr.com/sheared. S-H-E-A-R-E-D. And firstmovr has no E. So it's firstmovr.com/sheared. Oskar and Chris, we love partnering with you guys with firstmovr. We are grateful for the education that you provide to the industry, and thank you for sharing it with our audience again today. We appreciate it.
Thank you so much Peter and Lauren for having us today.
Yeah, thank you.
Thanks again to Chris and Oskar for going commando with us today. That link again is firstmovr.com/sheared. It will also be available at digitalshelfinstitute.org on the partner page. Become a member while you're there. And thanks again for being part of our community.