2015 MIT Sloan CIO Symposium guide: Digital disruption
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Jerry Wolfe belongs to a still-rare breed in the business world -- a longtime CIO who made the leap from IT leader...
to CEO. Wolfe is founder and CEO of Vivanda Inc., a tech startup spun off from McCormick & Co., the venerable spice company, where Wolfe served as CIO for 15 years.
Vivanda is what management gurus refer to as a platform business -- broadly defined as a business that creates value by connecting different customer groups. eBay, Airbnb, Twitter and Amazon are all examples of platform companies. Vivanda, billed as "the world's most sophisticated food experience platform," aims to forge connections between eaters and food purveyors. FlavorPrint, the company's analytic tool, combines information collected from an online quiz customers take with big data analytics and artificial intelligence to personalize their food experience.
Less than a year ago, you were the CIO at McCormick, the spice company. And now, after 15 years as CIO, you're the CEO of a technology startup. How did that come about?
Jerry Wolfe: I always had other responsibilities beyond the global IT organization. The last four years, I was working on incubating some growth strategy concepts (in addition to my other day-to-day duties) around the connected consumer. One of the really powerful ideas that we incubated was this technology called FlavorPrint, which was all about profiling different kinds of food, flavor and texture and then matchmaking with people by basically predicting what you like to eat and then helping you find it.
We got some great results. We saw growth in our business and realized [FlavorPrint] was way more powerful if consumers could use it pretty much everywhere they were interacting with food, rather than just at McCormick. We realized that we had a business. And so we looked at a number of different opportunities to place that technology in a separate business. I had quite a bit of entrepreneurial background prior to McCormick, and the opportunity I framed up was the one that the board selected. Hence, I am now the CEO of an interesting little tech startup.
Wolfe: One thing is the necessity of fundamentally understanding the entirety of the business model -- not fundamentally understanding and delivering great IT service. That's important but table-stakes stuff. The real value-add is in understanding your business model well enough to work with your colleagues around the business to create the right initiatives to move the business forward, whether by saving money or for growth. I had the great good fortune of being able to spend a lot of energy on the growth equation.
In terms of preparing to be a CEO, forming the business model and figuring out how to grow it are two hugely important aspects of making that transition effectively from the job I was in to the job I have now. Something [the CIO role] didn't prepare me for was the entrepreneurial side of it, which, luckily for me, came early in my career.
I was part of a startup in the '80s in the supply chain world for 11 years. I know what [it was] like to [stand] by a fax machine, waiting for a contract to come in to see if we were going to be able to make payroll.
Big data analytics for personalizing food
What does Vivanda -- and its FlavorPrint technology -- sell to other companies?
Wolfe: We're providing a service. It's a platform business. So basically, it's a couple of things: One is that it's a portable profile of an individual's food preferences, like yours, capturing everything and profiling you and helping you to understand actually why you like what you like. … And the more you use it and the more places you can use it, the more it can learn and help you. It's yours. It belongs to the individual.
What is the technology behind FlavorPrint?
Wolfe: McCormick is 125 years old, but over the last 30 years, it really amassed an unprecedented and unduplicated level of food science, sensory science and culinary expertise from about 100 countries into this massive data set that it uses to understand why we like to eat what we like.
It's quite sophisticated the way that these flavoring systems are created for different kinds of food, and the portfolio that McCormick has worked on is massive and it's global. So that's the data set. What we put on top of that was a bit of some lightweight artificial intelligence technology, so we could understand different attributes of food and then relate them together based on algorithms we've built off that research to give every piece of food a fingerprint, or FlavorPrint: 33 flavors, 17 textures. That's a distillation of something like 10,000 aroma chemicals down into what the consumer could consume. So, we do all that algorithmically off that data set.
So what does your data science department look like? Do you build your own algorithms or do you partner with people?
Wolfe: We partnered to build the initial algorithms and now we have one person in Vivanda who leads that effort. There are 10 of us. So we did some partnering along the way to get that baseline built and to understand the technology options that might best fit what we were trying to solve.
What's the vision for how big it will get or do you think about revenue at this point?
Wolfe: We think that by 2018, we can be a $100 million business. We think we could be helping 10 to 15 million consumers on a routine basis, at least in North America at the start, and be actively involved in the way that they make choices around food. We think in terms of places that you would be able to use FlavorPrint.
Virtual, endless aisle disrupts supermarket model
It seems FlavorPrint has the potential to disrupt some industries, or at least be absorbed by many industries.
Wolfe: It's really why FlavorPrint is so important, but it's also indicative of why platform thinking is so important.
In the food space, there's about 14 billion shopping trips a year just in the U.S. Over 80% of those today are significantly influenced digitally -- over 80%! Folks get hung up on the fact that we have a 2% level of e-commerce for food, but what we forget is that over 80% of the commerce is already being digitally influenced. And so, for companies like McCormick -- a General Mills, a Nestle, a Kraft, a Mondelez, a Campbell's Soup -- the reality is consumers are already making decisions long before they get to the store. Who walks up and down the aisles anymore?
The old model of spending is something like 25% of your sales on brand marketing (which is awareness); TV was about 10% of your sales, roughly speaking. About 15% of your sales was spent as trade promotion, which is in-store, and a lot of that went to price. So, it's basically, make [consumers] aware and then rely on the fact that they're walking up and down the aisles and grab their attention with the hot price at shelf. That trade spend is tens of billions of dollars a year just in the U.S. alone.
So we have this model that was built for post-World War II society that was really valid up until about five years ago. It's broken. Let's be a little bit softer with that: It's becoming extremely dysfunctional. And yet, you have this pile of unmet consumer need. If you're going to meet that demand, you have to be prepared for a virtual endless aisle. The other piece of it is you have to be prepared to personalize [for] a segment of one. Not a segment of millions. A segment of one. The brands have to make sense to you as an individual. So it's not just about you being aware, but what does it actually do for you -- specifically to you that's different from me -- that's different from everybody else?
And that's why FlavorPrint in food is important because it helps you articulate why it is a fit for you. Each of those companies and the retailers who are their channel partners have to figure out how to help you before you even get to the store, because if they don't, then they are all at massive risk of disruption -- whether it's by Amazon, or it's by Google, or it's by Instacart, or any of the other emerging players that are trying to figure out how to make your life easier.
For more on the platform business model, check out this SearchCIO overview on the shift to digital platform business models and how CIOs can contribute, then, learn about a Paris-based startup with a music streaming platform business model.