How our Industrial Business Models are evolving – PE Investor perspective

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With digital transformation being the central vision of businesses across sectors, digitizing data has become the key step in the process. John Seral, Operating Advisor at Clayton, Dubilier, and Rice, at the first IndustryNext Conference, talks about how Data Digitization has become the one true north of all companies. Especially in big Private Equity firms, data digitization has transformed the outlook of top management in investment decisions and has become the driving force in managing portfolios.

What we’re seeing here now is the business models are evolving. Here’s a good example of the auto industry, but we’re seeing a similar type of the following kind of processes across all the businesses. We have autos a couple of years back, maybe five, 10 years.

Everything was as if the manufacturer was kind of alone, you have some services around insurance, the dealer services, and the data never connected. Today, everything connects. I mean, between all the automation in the car, all the digitization with the services and other surrounding services. Location dictates everything from advertising, the service opportunities, the routes, your destination, your fuel levels. Everything is factors into suggestions on advertising and things coming from your automobile as well.

Safety systems are now going to start talking to other cars. They’re connected with GPS, they’re connected with all kinds of outside services. All our businesses are going through the same type of transformation. We’re seeing things connected. We’re seeing data being shared across in real-time. We’re seeing analytics. So in any industry with a product, you know,  you’re going to trace your customer journey all the way through from buying the product to servicing the product to improving the product and making changes to it.

So the models are rapidly evolving.

Next, there is this chart I got from Forrester, and I kind of blended in a little bit of what we’re doing at CD&R. Forrester sees that major disruptive technologies, one skill time versus degree of impact here – circles,  the solid circles are areas where the greatest data impacts are going to happen in one to five years. And some of our business is to fall into those circle areas are Transact, we just sold this business. What they basically did was create advertising websites for large insurance companies, typically under Medicare, Medicare Advantage type of products, and we would have people connect through advertising and passing out cards and all kinds of different forms of advertising. We get them to the link, get them to the website, and then from there, we can work with the customer that they’re on the phone to find the best product format. 

Typically, we’d have five to ten insurance products today, intelligent agents, tomorrow actually, we’re 50-50. All that’s going to be digitized, large rooms full of people spread all over the world trying to configure a product for a customer. Data and data analytics is what got us to this thing being half automated and within a couple of years of being fully automated. IoT sensors and analytics driving all kinds of innovation in the industry. Hussman is one example I’ll talk about later, but it’s our business that makes refrigeration products inside grocery stores, Walmarts, all kinds of retail locations, lots of equipment to go with that are fully loaded with IoT sensors pulling in data. And I’ll talk about Entytle’s example towards the end. Consumer data is driving tons of behavior and spending and predictive analytics in the Insyghts. 

Let me go to the next chart to show you something that Forrester has made. This chart shows what industries have the most digital approach today with customers and company strategies versus which industries will have the most digital impact and or be impacted by digital. 

You can see the upper right side of the screen, retail, pharmaceuticals, they’re in pretty good shape these industries & the business that we have great digitization and they’re clearly impacted, but they’re moving along with it. And if you move a little further toward the middle and the top, you’re seeing the dash lines where they’re being impacted, but they’re not moving as quickly. On the retail side, we’ve got my pizza boot, which is the furniture manufacturer, distributor, and sales location for France. We have about six hundred gas stations in the UK with M.F.G. and we’ve digitized quite a bit in the retail side and foodservice side of those fuel stops. 

Industries with desk circles are the ones where we’re struggling with a little bit. Their industry is changing rapidly, but we still have to catch up with digital. Some examples: we’ve got a Healogics business that does wound care and it’s a very, very digital business, electronic medical records in the background of it. But people still have to come in and have that wound inspected by the physician periodically. We’re just moving to a digital phone base, take a picture of it in a couple of dimensions and you can get a mid-term diagnosis from the field with relatively simple devices.

We’re heavily invested in businesses like Smile Direct. You can actually scan your teeth, a 3D scan, and get the trays that adjust your teeth mailed to you without even leaving your home. All kinds of new technology happening there and the professional services side. We’ve got TruGreen business services. Everything’s digital, everything’s in the app, the route planning, showing the customer where they are. You can add additional services, businesses like Delran Glass, which is safe light in the USA. If you ever use their services for a chipped window or broken window, you can track everything online and through your mobile app. You can reschedule. You can watch what they’re doing, their status of the install. Incredible change in these industries. Still, they’re running after the disruption that’s going on in there. 

This chart is pretty much a high-level chart, but really the message here, it goes without saying that every industry has to move quickly toward a data-driven model, and tools like Entytle get us there. 

We’ve learned that you really have to be led by the customer needs and create and use data from those insights and interactions with your customers and from your assets. Critical to operations critical to everything you do going forward to retaining the customer, selling additional products and services, and growing that customer. You have to connect every day. You have to stay connected. You have to be fast and you’ve got to move fast in your competition.

About John Seral:

John is a seasoned Chief Information Officer who spent the bulk of his career in General Electric, in multiple different roles at multiple different divisions. He ended his career at General Electric as Chief Information Officer of the GE infrastructure division, which was a collection of some of GE’s largest businesses such as power, aircraft, and transportation. 

During his time in GE, John had an unbelievable front seat to the digital changes underway along with some of the investments GE had made. After that stint and tenure at GE, which was indeed a long and very successful tenure, he then moved into a private equity role at Clayton Dubilier & Rice, advising companies as an information technology leader. 

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