How to resolve price conflicts between new and old channels? How to meet consumers' omnichannel shopping needs? How to manage the operations of numerous emerging channels? How to reach and operate consumers at scale and low cost? How to ensure transparent allocation of non-quantified expenses? How to achieve one-stop omnichannel delivery? How to leverage technology to break through management communication, process systems, and marketing?

These are the specific problems every enterprise manager faces daily. Essentially, these problems arise because the current organizational, management, and marketing models have significantly lagged behind market changes and cannot adapt to the market.

It can be said that to solve these urgent problems, digital transformation is inevitable.

Digital transformation and upgrading is a very large strategy and a basic strategic task that all enterprises must complete in the next decade. Although most enterprises attach great importance to digital upgrading strategies, they lack systematic methodology to guide tactics, methods, and tools.

What is digitalization?

Luo Huagang, who comes from Midea Group, defines digitalization as follows: Enterprises use big data, cloud computing, the Internet, and intelligent technology to reconstruct their R&D, production, sales, procurement, talent, and organizational systems, achieving the "four modernizations" of operational digitalization, management empowerment, factor efficiency, and intelligent operation, ultimately enabling enterprises to create and meet customer needs more effectively, reduce costs more efficiently, control risks more systematically, and make smarter decisions scientifically.

Its fundamental value is to enhance market competitiveness, improve innovation capability, achieve modern governance, and ensure sustainable growth.

Digital transformation does not change the essence of business; the essence remains creating customers, meeting needs, continuous innovation, and realizing value.

What organizational and market problems do today's business operators face?

Changing consumer demands: Product life cycles have significantly shortened, and brands cannot quickly respond to consumer demands.

Low organizational efficiency: Control-oriented, department interests first, no information sharing between departments and ecosystem partners, extensive management of enterprises and partners, low operational efficiency, no data support, and no online capability.

Data vacuum: Data fragmentation, channel blind spots, and inability to provide precise decision support for a rapidly changing market.

Extensive growth has reached its end; the market has entered a stage of stock squeeze growth, requiring lean operations.

What should be noted in digitalization?

Do not treat technological means as the focus of transformation. Transformation is essentially about reconstructing new marketing models based on today's changes in people, goods, and places.

What problems should we solve with digitalization? The core is growth; deconstruct growth, and we must see the various problems marketing faces today.

From an industry perspective, most traditional brands still drive production and sales through chain-like links: brand owners produce products, use distributors to distribute goods to retail, and finally use advertising to complete consumer education.

Internally from R&D, production, logistics, communication, sales, to external distribution, retail, and consumers, the chain is long, data is not connected, and efficiency is very low.

In the past, this was not a big problem in a super-large single-demand incremental market, but today, the structure of people, goods, and places has changed dramatically compared to ten years ago, yet the main body of enterprise distribution still uses the traditional distribution and wholesale model.

Either when facing the new retail environment and new business forms, a separate department is set up to patch things up, or when facing disruptive distribution models, non-cooperation and blocking are adopted. Essentially, the distribution model can no longer adapt to new retail channels.

There is deep business logic here. When an operating system cannot be compatible with new business forms and adapt to new demands, enterprises need to consider fundamentally solving this problem from the structure and model.

Above we discussed the necessity and importance of digitalization at the strategic level. Below we discuss what problems the marketing end needs to solve at the application level:

1. Marketing level: Creating user value as the direction

Based on consumer needs, build a complete user value operation system from cognition to transaction, delivery, and relationship building. This system includes information reach based on user behavior, omnichannel transactions, online-offline integrated delivery, and membership operation systems.

The hot topics in recent years—omnichannel retail, BC integration, and private domain operations—are all based on creating user value, meeting consumers' full-scenario consumption needs, and building a closed loop of people, goods, and places.

Ultimate goal: Efficient response to consumers, meeting their consumption needs 24/7, omnichannel, and personalized. Ultimately build a reverse value chain, produce based on sales, and let demand determine production.

2. Supply chain level: Using data online as a means

Not only the internal supply chain system, but also distributors, dealers, salespeople, products, transactions, management, processes, and behaviors are all online, with all elements connected; including commercial flow, logistics, capital flow, and operation flow, all visualized, quantifiable, evaluable, and incentivizable.

Distributors and brand owners' warehousing, logistics, orders, and SFA are all connected, allowing managers to see real-time data without leaving the office.

Build a network supply chain, transform supply chain to supply network, share information, coordinate warehouse networks, separate commercial and logistics flows, and achieve one-stop online-offline delivery.

3. Decision-making level: Applying data as the goal

For most consumer goods enterprises, there is an extreme lack of channels to obtain consumer data. They can only obtain consumer consumption data through promotions and surveys, but this data is mostly physical data such as city, income, occupation, and age. However, data on consumer interests, personality, habits, and behavior cannot be effectively obtained and captured.

This has caused enterprises to mostly use qualitative analysis methods for decision-making in the past. But today, changes are rapid, product life cycles are getting shorter, and enterprises need to quickly obtain consumer data, connect with downstream distribution, retail, and online platforms, form an integrated data feedback system, turn offline behavior into data, feed it back to marketing and production, and form a decision-making closed loop.

4. Organization level: Digitalization enables team collaboration

Traditional enterprise organizational departments are silo-style management, focusing on interests and market control, not user value. There is no information sharing between departments, let alone collaboration.

A very important goal of digitalization is to achieve platformization, empower employees organizationally, let those on the front line who hear the gunfire command the battle, and achieve multi-department collaborative operations in response to complex and changing market environments.

Final words:

How to achieve digitalization is a very worthwhile topic to discuss. Midea's digital strategy took nearly 10 years to fully complete the transformation. The process was complex, difficult, and arduous, but the results are also very significant. If we only look at market value, on September 23, 2021, Midea's market value was 466.3 billion yuan, equal to the sum of Haier Smart Home's 237.2 billion and Gree Electric's 229.3 billion.

Going back ten years, Midea's market value was about 69.1 billion plus Haier Smart Home's 52.4 billion, roughly equal to Gree's 112 billion. Midea came from behind, which also verifies that Midea's digital strategy has completely surpassed its competitors in the effectiveness of business models and the advancement of governance methods.

Digital transformation is not just about installing a digital tool or completing the online conversion of some offline data.

More importantly, based on market changes and consumer needs, complete the digital reconstruction of marketing, supply chain, decision-making, and management, oriented by user operation, establish a rapid response mechanism for consumers, digitize offline business, turn channel and consumer behavior into data, quickly feed it back to production and marketing, form a decision-making closed loop, and ultimately achieve consumers' 24/7, omnichannel, and personalized consumption needs.

This is the core of digital transformation and the fundamental way to solve future growth.

| Founder of New Distribution FMCG industry channel expert, author of over 400,000 words of FMCG industry research articles For communication, you can add WeChat by long-pressing. When adding, please indicate your company, position, and name.

Are you "watching" me?