No Pain No Gain

What's the absolute hardest way to launch a new second act product on top of a successful core business?

A digital transformation.

This means a lot of different things to different people, but let's define it as when a traditional business - think manufacturer, grocer, healthcare, etc - aims to introduce digital capabilities and best practices to dramatically overhaul their relationship with their customer, their business model and financial profile (often looking for higher margins), and how they run their business.

This often means launching new digital products on top of a very non-digital core business.

I took on this challenge at H-E-B from 2018 to 2020. For the non-Texans out there, H-E-B is a family owned and operated retail and grocery business with 400+ stores across Texas and Mexico. Founded in 1905, it employs over 150,000 people and generates over $40B in revenue.

The company started upgrading its outdated technology in the early 2010s, but Amazon’s acquisition of Whole Foods in 2017 was a shock and deemed an existential threat, sparking a true transformation.

After many near failures, H-E-B transformed and beat Amazon at their own game, becoming America’s top rated grocer three of the last five years due, in part, to their superior digital capabilities.

But it almost never happened. Why?

Because digital transformations are BRUTAL (but necessary) work.

We encountered four major challenges, none of which are unique to H-E-B (which is a fantastic company, and I think one of the few who could pull something like this off).

CHALLENGE #1: STRATEGY

There was no strategy for how to do entirely new things, like digital products. The strategy was, in essence, keep becoming a better and better grocery an retailer.

We had many opinions - all wildly different.

We had planned technology upgrades - but no real changes to the business or customer experience.

There was no centralized roadmap, making prioritization nearly impossible.

We had a ton of customer research activity, but it was fractured - meaning different teams had different views of what was true about our customers.

CHALLENGE #2: EXECUTION

We had decade(s) old technology. Literal physical mainframes running on COBOL and warehouses managed on green screens.

We were (initially) reluctant to compress margins in the near term and therefore were notably under invested.

The legacy technology and under investment caused people to get frustrated by the slow pace of change.

The frustration revealed a lack of clarity on who had critical decision making rights related to digital.

CHALLENGE #3: DIGITAL LITERACY

New hires, whether digital or anywhere else, were expected to learn the grocery business inside and out.

But no one was expected to learn how the world’s best digital companies - Amazon, Apple, etc - worked and related best practices.

This resulted in incredible confusion as people were speaking the equivalent of different languages.

CHALLENGE #4: PEOPLE & CULTURE

When we started mixing in talent from digital backgrounds, both startup and big tech co, with the incredible - but very different - expertise required to run a wildly successful grocer and retailer, we ended up with very different perspectives on almost everything.

Initially, we tried assimilation, with the first wave of digital hires expected to change their thinking to match that of tenured employees. Many got frustrated and left.

Then digital talent was separated into a stand alone organization. That caused deep us vs them tension, despite best efforts.

We had slightly humorous, but telling, cultural faux pas between tenured employees and newer digital hires. For example, I caused quite a stir as the first person to ever wear shorts into the officer's boardroom at HQ.

Things only started clicking when we began to understand that the different perspectives were strength, and we needed to find ways to respect and integrate all of them.

Kudos to H-E-B for having the stomach and conviction to pull this off and solve all those challenges, and continue their incredible 120 year growth story. They'll be serving Texans for generations to come because of it. As for me, I don't think I've ever learned so much, on so many different levels, in such a condensed period of time.