Adjacent digital business models for manufacturers

A mid-sized manufacturer of home cleaning products, pre-pandemic, had always sold to distributors, who then sold the products either online, sort-of, to consumers or to retailers. The manufacturer had no experience selling to consumers in physical retail, let alone to online markets. But the pandemic showed them opportunity. A website was launched, some ad dollars were spent with an ad broker, SEO consultants hired. Within six months of launch the whole project was summarily shut down with angry shareholders demanding to know what went wrong. The answer was simple.

They’d made an assumption that their small marketing team could read some blogs, hire some professionals and voila! the dollars would roll in. They even let some of the sales team get involved and they leveraged their in-house logistics person for shipping and even opened an Amazon store. Yes, they got some sales, but not enough to warrant ongoing expenditure to build digital market share. What they did wrong was try to bolt on digital business practices to people who had no skills in the area and predicate the model on what their traditional business was. So what’s the option they should’ve gone with? An adjacent digital business.

When you’re a B2B (business to business) company and you try to switch to just or also going D2C (Direct to Consumer) this is a huge change in thinking. A surprisingly large number of manufacturers and other B2B businesses however, think they can do it with existing resources or by hiring a good web design firm, some SEO and digital ad agencies. The majority of these efforts fail because of that.

The better option that sees more chances of success is to build an adjacent business that will sell the D2C version of the product. The key is to develop the business model first, which should clearly define what existing resources can properly be leveraged and where other, new skills, need to be put in place. This means not relying on an outside web design firm and an array of consultants to run what should become a profitable business. Existing people will serve the original business first because that’s what they know. Key decisions may take a while to be made and the array of consultants will struggle to get the proper attention needed. Corporate culture plays a vital role in the success of any significant digital project.

If a manufacturer is going to to build an adjacent model, they need to find someone who can help them develop an effective strategy and business plan that will show them what technologies and tools to invest in, the right skills to hire for and how to stand up a team that will execute properly under sponsorship from an executive who can make sure it happens.

This could look something like hiring a couple of full-stack developers in-house, digital designer and someone who can take on the SEO and ad buying work. Their sole responsibility is the success of the D2C digital initiative. They might well report to a senior director or VP of marketing, but existing marketing people will remain focused on the B2B, original business. Inventory management and logistics can likely be handled within the existing structure, but that needs to be well figured out too.

If a small to medium-sized company doesn’t give going “digital” the proper business modelling up front and makes too many assumptions they will fail. A decade ago, things were much easier and less costly to stand up a website and do some eCommerce. That is no longer the case. Today, more investment in time and people is required. You need to fully consider the customer experience from landing on your site to purchase, building your inbound marketing strategy to drive people through the funnel, well defined metrics and the right analytics tools, running aa/B testing campaigns, constant SEO and content strategy. It’s a heady mix, and if not properly considered, will fail and result in a lot of angry people wagging fingers at each other. Playing in the digital business world is far, far more complex than it used to be.

You might also find our article on overthinking a digital transformation helpful too.