Hacking Direct-to-Consumer The diconium playbook towards successful D2C Chapter 2: How to develop successful D2C business models
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How we develop D2C business models
How we proceed and approach towards designing D2C Business Models
Starting with D2C business model detection and development, we approach the execution with the business model foundation and operating model. BASELINING
VISION & OBJECTIVES
VALUE PROPOSTION
Scope based on strategic guidelines, business criteria, customer expectations and behavior
Clear digital vision, strategic objectives and potential success factors
Validated customer centric value proposition as center of building and running the D2C business model
D2C Business Model Detector
D2C Business Model Foundation and Operating Model
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diconium Business Model Detector
The diconium Business Model Detector helps finding anchor points for a suitable D2C Business Model for your company WHAT IS IT? For FMCG companies, becoming more consumer-centric with one-toone consumer relationships, is an essential change. Historically, and still today, consumers goods companies mostly operate in an indirect sales model via retail partners. As described earlier, there is a high need for change towards D2C for many reasons. In some cases, first trials in D2C were successful but most failed to live up to expectations. Many other companies have not yet tried to make radical moves. The reasons why are plenty, but to name a few: − − − − −
Not enough focus on consumer-centricity/ missing relevance Existing products and solutions are geared towards classic distribution Missing digital and agile know how and capabilities Legacy systems and processes are not suitable for D2C No agile approaches (MVP mindset), instead aiming for large technology solutions without prior experience and learnings
The diconium Busines Model Detector provides a structured and methodical approach to develop the suitable D2C business model for your company.
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STRATEGIC GUIDELINES 06
PARTNERS
BUSINESS CAPABILITIES
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CAPITAL
BUSINESS MODEL PORTFOLIO
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CONSUMER
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The diconium Business Model Detector covers the most relevant pillars necessary for identifying the most suitable D2C approach
RESULT
FAQ
APPROACH
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STRATEGIC GUIDELINES
Any direct-toconsumer approach should be based on a clear company / brand vision and an overall digital business strategy.
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BUSINESS CAPABILITIES
Understanding the existing organization, people, processes and technologies is essential for identifying the new capabilities needed.
− Which capabilities − What is the role of can be developed digital in the current inhouse? strategy? − Which capabilities − How could digital should be acquired? impact the strategic direction?
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BUSINESS MODEL PORTFOLIO
Understanding the existing business model(s), consumers and customer relations is important to design new digital sales and operating models. − What are the existing (digital) business models? − What are the customer (B2B) relationships?
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CONSUMER
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CAPITAL
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PARTNERS
Understanding the consumer target group, existing use cases, customer journeys and product usage is essential for consumer-centric D2C models.
Identifying the Assessing the potential of the investment capital for product development, existing partner marketing or M&A is network in order to use the first step towards untapped synergies or financial feasibility of establishing new the business model partners. options.
− What role does D2C play for consumers? − What are the Jobsto-be-done for the consumers (B2C)?
− What is the current investment capital for digital business? − What are the focus areas for investments?
− Who are the current partners and to what extent? − Who could be potential partners in D2C?
An Analysis from each D2C business model detector area, that enables you to make a profound decision on the preferred D2C Business Model option (inhouse organization, outsourcing, acquisition or innovation hub). Based on this decision, the MVP can be developed. The next step is an implementation roadmap and milestone-plan, which will be explained in the Chapter 3 of diconium‘s HOUSE OF D2C®. 14
Choosing the right foundation for future D2C business model options is a key decision for any organization Our market analysis and experience has shown that there are four key basic directions on which D2C Business Models can be built. Each approach comes with pros and cons and implications for the existing business model. More in-depth descriptions can be found on the following four pages.
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INHOUSE ORGANIZATION
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OUTSOURCING
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ACQUISITION
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INNOVATION HUB/LAB
Note: We don’t consider 3rd party selling models (e.g., Amazon, Otto, Zalando…) as actual D2C business models. However, there will be a complete separate chapter dealing with the question of how to work with 3rd party platforms.
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Appendix: Examples of different D2C business activities
D2C examples by 3 clusters
SPACE10 by
dx Innovation Hub
Mondelēz
AQUISITION Examples: Inspiration & Challenge
D2C approach Acquisition
Innovation Hub
Inhouse
Degree of organizational integration
low
high
Main D2C objective Brand strengthening Customer relationship building
Sales channel & model Online Channel: Online Shop
Third Party
Portfolio differentiation Access to a new market Price sovereignty & independence Customer data access
Model: Multichannel
Single channel Omnichannel
F O O D S P R I N G – Mars' entry into the world of fitness food
In 2019, the global confectionery manufacturer Mars GmbH acquired a majority stake of the German start-up foodspring, which was founded in 2013. Thanks to the acquisition Mars got further access to the growing1 market of (personalized) health and fitness products. In addition, the consumer goods group benefits from the ecommerce and multichannel experience of the former online pure player foodspring, which is now represented at many stationary points of sale. In 2021, the two founders sold their shares and stepped out of the company completely.
1 Market
volume 2017: 25 billion US dollars, Forecast to 2025: annual growth of more than 9% per year; Sources: Lebensmittelzeitung 2019 according to Grand View Research, Welt 2019, deutsche-start-ups.de
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foodspring x Mars – D2C Inspiration and Challenge
// I N N O V A T I O N D R I V E R
// C U L T U R E C H A N G E
foodspring is part of the Mars Edge division, which is dedicated to improving human health. It has the status of a start-up within the group and is managed largely autonomously (until March 2021 by its founders and now by a former Redbull manager.). Thus, foodspring is an innovation driver for the group and at the same time it can draw on Mars' resources, know-how and internationality.
With foodspring, the family-owned company has a new brand in its portfolio that fits very well to the core business "food”. Therefore, the integration challenge lies rather in areas of culture and mindset, sharing of expertise and in ways of working than in value creation. This mutual transformation requires a wellconsidered change process that fosters integration and community while preserving foodspring's identity.
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