What Does Running Out Of Chicken At KFC Teach Us About Digital Transformation?

 By Michael Gale and Chris Aarons

The fast food business is a brutal industry the world over. It is very location based (as speed matters), heavily driven by crazy offers and beholden to franchise owners who are motivated very differently than the brands they work with. That is why almost everything fast food giants do is to speed up the process, reduce costs, drive traffic or all of these together.

It comes as little surprise that the KFC in the UK moved to a new supply chain to compress the process in order to better compete in the market. Unfortunately, KFC was surprised last week when they ran out of chicken. Yes, literally KFC (which stands for Kentucky Fried CHICKEN) ran out of chicken in the UK due to this supplier change. The company’s officials have attributed the problem to KFC switching its delivery contract to DHL, leading to a logistical failure in Britain, the fifth-biggest market for KFC.

But, this is how cutthroat the food industry is. KFC left a long-time and reliable supplier in an effort to gain any amount of advantage in the market. With almost every organization and industry digitally transforming, incidents like KFC’s are becoming more commonplace. This is due to the fact that it is incredibly difficult to get transformation right. With no single plan to follow, many are breaking as many things as they fix in an effort to come out ahead.

While you might not be in the fast food business, looking for every conceivable advantage to drive demand or delight customers requires careful planning across four key areas:

1.    Instant knowledge – a level playing field makes pricing alone insufficient to buck the market shifts. Coupons, offers and location-based services make digitally discounting a near-instant idea for any brand. But, pricing is no longer a primary weapon when everyone in the market can and does use it. Plus, consumers and even business buyers have instant access to feedback and information, making any pricing gain temporary until the next one from another competitor. This is something every brand faces when people go to buy, including us. Just Google The Digital Helix and see what we said. This is an instant process that most buyers use both for us and for your brands (both B2C and B2B). Organizations need to plan for this and work to have the right/best information as customers develop their own complete portfolios of experiences that dictate who they will buy and follow.

2.     You need to be in the moment while being just one step ahead. There are always going to be shifts in the market, and in the customers and their needs. But many of these have clear starting points. Just look at generational shifts. Millennials and the next generation are changing patterns in unusual ways. Being born as digital natives has given them infinite choice with near infinite ways to find the experience they want in almost instant time. In fact, they mix and match digital and traditional ideas across buying, using, and renting via digital (like Uber and Lyft for transportation). This multi-dimensional nature means a single stream or strategy won’t work. You have to see the trends and be just one step ahead and prepared to change as the shifts occur (like a pricing action or a supply chain strategy). To be ready to change and move, everybody across the organization has to be connected (stores, logistics, marketing, listening centers) and ready to act right there in the moment.

3.    The FCK KFC ad illustrates the power of transparency. Everything is instant and transparent all the time. KFC’s reaction to the mounting complaints from customers to the mapping of chicken shortages across the UK by the media illustrates the power of transparency. But it also shows the need to induce the right emotional response for the moment and to not try the typical approach.

4.    The esoteric should become commonplace. Constantly look for examples of how digital is changing the way your organization and market think, both strategically and tactically. Also, there is much to be learned across industries. Just look at how Capital One is trying to do converge banking with the idea of a coffee bar. It may sound esoteric, but digital makes this thinking necessary for success. Finding these moments and recognizing new ways to handle them is vital.

“Digital makes the hard easy. It makes esoteric commonplace. But most of all, it makes things that used to be fairly time consuming real time.”?— Michael Schrage, research fellow at MIT Sloan School’s Initiative on the Digital Economy, oversees research on digital experimentation and network effects, and is author of The Innovator’s Hypothesis

While everyone is looking for another way to take advantage of digital, the goal of constantly listening, watching and thinking with the data you have is to make the esoteric commonplace. This is where organizations get lost, as they have too much noise and inputs to identify the real signal and insights that can drive the business. That is why you need to pay attention to each one of these elements on a constant basis. The Digital Helix: Transforming Your Organization's DNA to Thrive in the Digital Age book has a simple model: 7 drivers, 7 challenges and 7 digital DNA components. It was designed this way to enable both those struggling (84%), and those that got it right, to have a complete framework to use to succeed. Also, this approach ensures that nothing should surprise you in the process of digital transformation as you march to thrive digitally.