Knowde’s annual Executive Summit is an opportunity for those in attendance to hear how top industry executives are tackling the initiative on every chemical and distributor company’s roadmap this year: Digital Transformation.
Knowde’s VP of Sales, Kyle Bastien sat down with Eric Parkin, Chief Technology Officer of Batory Foods, and Sean Tilley, President & CEO of Tilley Distribution. Together they discussed how they are leveraging Knowde’s master data management platform to tackle the barriers to digital transformation in our industry.
Read the transcript below to discover the strategies that top industry executives are implementing to successfully navigate their digital transformation journeys.
Kyle Bastien: This morning we heard from a great group of folks that were talking about some of the challenges the industry faces with digital transformation and the importance of data. It was a great discussion.
I’m joined by a couple of gentlemen who we work with here at Knowde. They’re using our data platform to solve some of these problems, and we wanted to share a little more about their business and their experience working with us. Gentlemen, I’ll have you introduce yourselves. Why don’t we start with you, Sean?
Sean Tilley: Sean Tilley, CEO of Tilley Distribution. We’re a chemical distribution business primarily focused in the food ingredients and flavor fragrance markets. We are a global business with operations in the US, Europe, Brazil and China.
Eric Parkin: My name is Eric Parkin. I’m the Chief Technology Officer at Batory Foods. Batory is a food ingredients distributor here in North America with facilities all around the country distributing ingredients into a lot of different CPG companies, beverage, bakery and places like that. I’ve been with Batory for a whole four months, but it’s been a very active four months. Prior to that I was with Cargill for 13 years where I also had some experience working with Knowde during my time there.
Kyle: Thank you, gentlemen, for joining me up here today. One thing I think everyone will be thinking about on this digital transformation journey is: when is the right time to do this kind of stuff with everything going on—all the various competing priorities?
Sean, I know you were working on strategic things that kind of proved to be a compelling event. Can you tell me a little bit about what was going on for you at the time?
Sean: Sure. We took on a strategic investor and partner, which allowed us to make a series of acquisitions in a very short period of time. We acquired three like-sized businesses within six months. We ended up with four different ERP systems, four different master data structures (or no structure at all), different processes, different talent levels. It was a mess. The acquisitions were strategic to our business in terms of end-market services and capabilities—but how do you bring all that together?
One of our business cases with Knowde was figuring out how to integrate the businesses. We had to start with our master data, right? We couldn’t put together an ERP or new ERP without cleaning up the master data. I got annoyed by Ali for probably six or seven months, like, “why aren’t you talking to us? We can help you.” They sent Swamy, their Chief Knowledge Officer, a few times. We realized that Knowde’s not just this marketplace, not just this web portal – there was this underlying product management tool; Knowde could stand up an information management tool that fed all these systems that we wanted to implement.
Once we realized that, it was like, “Okay, we need to pause and figure out how we bring that forward so that we can have a clean, organized business to leverage all the strategic elements we want to do going forward.” We have that underway now and we’re about to go live on a number of these strategic events for our business. We’ll go from integration to growth here in about two months, which is really exciting for our business.
If you go back to the ROI of all this, Knowde has brought the ROI equation and timeline to a very short period of time. I think if we did this ourselves we’d still be scratching our heads 24 months from now.
Kyle: Thank you, Sean.
Eric, you had a very interesting role at Cargill before coming to Batory. You did a lot to drive technical innovation—some fits, some starts. Talk to me about your experience at Cargill and what you are up to at Batory.
Eric: The food industry as a whole has continued to look at the role technology is going to play in its future innovation and, more importantly, thinking about how we can continue to create more transparency. I think 5-6 years ago people in the food industry talked a lot about transparency from a farm-to-fork type activity. It’s a great marketing tool, but outside of that people weren’t necessarily changing buying behaviors. Decisions weren’t happening off of that.
Where transparency really started to come into play was the effectiveness of how we move products through the entire supply chain. If you think about all the interaction points—from the farm to a manufacturer, to a distributor, to another warehouse—it’s all point-to-point, so the way data moves was often slower than how the physical product moves.
Moving into Batory from Cargill, they are similar in a sense. Batory has been a family-owned company for the last 45 years that’s grown through organic growth as well as acquisitions. We now have one ERP system. We have our own warehouse management solution. We have a logistics solution. We have a lot of point-kind of things in place. Where we knew we needed to go was: how are we going to serve our customers and our vendors differently in the future? How are we going to do that by creating more transparency of that data? I didn’t have to take the eight months of Ali calling. Fortunately, Ali had started that work before I got there.
We had an e-commerce solution in place. It was a great front-end tool that looked flashy and had all the drop-downs and the right things you’d expect, but never once talked about data. When I came in, my first question to the team was, “Okay, how are we structuring the data behind this e-commerce tool?” And they said, “Oh, it’s in our ERP.” I said, “No, it’s not all in our ERP. There’s technical data sheets. There’s a lot of information that needs to be pulled out.”
We immediately saw there was a big gap in that e-commerce solution. We recently decided we’re not moving forward with that because we were never going to be set up for success if we didn’t start with the data.
Kyle: A lot of the folks have to consider this idea of readiness. They bring up points like, “Should we be doing customer segmentation first? Should we be doing ERP consolidation? Our sales team is too offline. We need to prepare them for this over some period of time.”
How long did you think about this idea of organizational readiness for and what gave you the conviction that now is the right time?
Eric: One of the areas that’s been important for us is segmentation and how we segment out our customers. A big part of that was looking at how we want to serve our customers in that future state.
We have a long tail of customers in the distribution industry that we are serving smaller quantities to and trying to get product to. We also have those larger customers that we’re trying to continue to create a very important relationship-based business. We believe that relationships are never going to go away, but the easier we can make those relationships, the better we’re going to be set up.
I think the piece that’s been important is starting with the vision of where we want to be in five years—a company that can be completely transparent through the ecosystem, how information moves between us and our vendors, us and our customers, and internally in our own organization.
In order to get to that vision, we’re going to have to chunk out these pieces. First, setting those horizons of what we wanted to get done, then starting with some of the base layer structures, then putting in the next layers. I think often through a lot of transformations, there’s this concept of “I’ve got to get everything right first on my base information, and then I’ll move to the next thing.” The reality is those horizons should actually overlap quite a bit. If we waited for everything to be perfect, it’d be six years later and everything would look very different—and we’ve built it all for a changing vision.
Sean: Swamy and I just had that conversation. Get 80 to 90 percent there…
Eric: …and then go.
I truly believe that. We’ve seen it in other industries, where you wait too long, and you have to start over because you’ve forgotten what that vision was and where you’re going. So that’s been a big part for us. Just move, start taking the chunks out, and still have that future vision of where you’re going.
Kyle: As Ali and the panel were talking about earlier today, there are not a lot of companies that are selling tech into this space. So I can imagine that rationalizing the investment, coming up with ROI, figuring out—How much is this worth? What’s my return going to be?—is something that obviously you both had to think through.
How did you do that on your side, Sean?
Sean: When we look at our strategic initiatives for this year, like Eric was just saying—a five year plan—you’re positioning assets, time, people and dollars to a certain area.
What we had to do first and foremost was bring the businesses together. We set budgets, if you will, or capital allocations to do that. Then we have to figure out “How does this unlock value on the business?” That is a hard thing to do. We call them value-creation initiatives internally. When we look at the value-creation initiatives we layer on our business, it’s commercial excellence, then it’s operational efficiency, and then it’s digitization. It’s a big portion of what we have to go do. We can throw people at processes and problems in our business. In distribution, we’re very unsophisticated. We really are. We’re sales and logistics people.
So when you talk about digitizing your business, you have to have talent to go do that. We first started with a talent upgrade of our business. This may not sound good to some folks (we’re not the largest organization), but we turned over 68 of 200 employees in about an eight-month period because we didn’t have the talent to digitize our business or to take that next leap of growth. We first had to invest in the talent to enable us to bring on these strategic initiatives, and that’s a hard thing to do. But, as a business leader, you have to make those types of decisions because the good of the business is the good of the rest of the employee base. It’s what unlocks that future growth.
Then once you layer in that strategic vision and work back from there, you can start to figure out your ROI and unlock future growth. Everything we do is very deliberate. We bracket some value ranges in terms of “what can this deliver for us?” It’s not an exact science, but we can get 80 to 90 percent there.
Kyle: Appreciate what you said, Sean. You’re not the first person this weekend that’s talked about making sure they have the right team and the right people in place. For the whole organization, you have to bring them along in this journey. Enabling your team to come along with you is really important. It seems like the companies that do that the best are the ones that get the most return on these types of investments.
Besides making sure you have the right people in the key leadership roles in place, what else are you doing to make sure that the organization comes with you and that you are able to realize all these kinds of returns?
Sean: From my perspective, one is transparency. They have to know where we’re headed, what we’re working towards, and why. That’s a big thing. And the teams have to believe in what they’re doing. It can’t just be top down. A lot of our folks who are engaged in these transformational projects—it’s them driving that initiative. It’s not me, it’s not the C suite or the ELT. It’s our folks who are working with the Knowde folks to drive some of these things or these other implementations we have going.
We’re working with Knowde on the storefront, the master data cleanup. They’re integrating into our website. We’re layering in a digital 4PL logistics model on our business that digitizes our logistics routing operation. You can’t do that unless the team members buy into it and they have the talent to go drive that across the organization.
Eric: To build on this, because I think it’s such an important point…
Being in a technology role coming into Batory—and I’ve seen this at other companies as well—I often heard people say “the IT organization wants this” or “the business wants this” or “we have to do this for the business.”
Coming in, I said, “Time out. We are all the business. It doesn’t matter if I sit in IT, finance, operations or commercial. If we’re not sharing in the success, but also sharing in building the strategy together, all we are is order takers in IT. That is not where we’re going to be, and that’s not what’s going to move our company.”
To shift that across the board for the leadership as well we sat down with them and said, “As we go forward, it’s no longer trying to create this bifurcation of your organization of ‘the business’.” Because everybody in IT had felt like they were like the next rung down when we’re all actually trying to solve the success for the organization.
So shifting away from that mindset and putting everyone in that position to be at the table, have those strategic conversations, talk about the broader things that needed to be done, and celebrate the wins, is also big.
Kyle: Speaking of that point – we are on this journey, and the journey has to have a destination, right? If you’re lost at sea, you have to describe land in a way that’s really exciting for folks. So when you think about- whether it’s working with us, or just this journey that your companies are on- generally, how do you paint that envisioned future state picture for your company, and why should everybody at Batory or Tilley be excited about the future?
Eric: It’s what we talked about before. I have a firm belief in the food industry in general because data moves so slowly between our organizations. We have a massive opportunity for efficiency and that’s going to require that we’re working together more than we are trying to create protectionism. Distributors, historically – maybe we’re trying to protect some of their kingdom. Instead if we created more of that transparency, we could be successful a lot more together and share in those wins on our goals.
How that information moves is going to create the efficiency side, but it’s also going to create a lot of new opportunities and growth. Those companies that focus on creating an environment where information moves back and forth freely and you have the ability to see: where are customers at in the pipeline of the distributor? Where are they at with these different types of products? How is that going to help them figure out what needs to be done from those manufacturers’ R&D teams?
That’s where we’re going to see the speed for the food industry really move quite a bit. When I look forward, those are the things we have to do. Earlier today, we heard about supply chain challenges. You hear about changing consumer diets, what people are interested in. Those are all moving faster than they ever have. I’m a firm believer that today is going to be the slowest we’ve ever moved because everything is going to continue to get faster.
Kyle: When you think about what’s to be excited about at Tilley, you guys are doing a bunch of really cool stuff. When you talk to your team internally, how do you get them fired up for the future?
Sean: It goes back to painting that vision of where we want to be. We’re setting out to be a market leader in specialty distribution, and we have to explain what that means. What does that mean to anybody in this room, really? But we want to be a digital leader, right? We want to be a product line leader. Similar to what Eric was just saying, we have to make sure we have the right principles in our network and that we’re aligned with their product lines going to market.
How do we put a digital strategy around that? Build an ecosystem and a team that buys into that ecosystem. I hate to use that twice, but it really buys into it and can go drive it on the business, go drive it on the markets. When they get results and we celebrate those wins, you really build a culture. We always talk internally about building a winning culture and a culture of accountability where you’ve got to have very defined sequences—which Eric has done a nice job laying out—so people can understand, and understand what success looks like. If they don’t know what success looks like, no one knows where to drive to.
