Embracing digitalisation to tap into new markets
For more than a hundred years, Vorwerk, a diversified German business best known for direct sales of its high-end Thermomix food processor and Kobold vacuum cleaners, made its name with door-to-door sales and by selling products at parties.
This created a direct relationship with customers, while turning the Wuppertal-based family business into the world’s fourth largest direct sales business by revenue. But now, digitalisation is taking the company to a new level.
For many company leaders, going digital can be scary, as the technologies – like drones or Artificial Intelligence – can seem complex and futuristic. A change in mindset is often required. Leaders have to let go of what made them successful in the past and be open to what could make them more successful in the future.
But for those who embrace change, as Vorwerk is in the midst of doing, there are significant rewards.
Reiner Strecker, managing director at Vorwerk
For more than 50 years, Vorwerk’s Thermomix product enjoyed steady growth. But by 2012, market share was under threat by similar products from competitors.
The company took time out to thoroughly assess the relative strengths and weaknesses of its appliance. Management knew that it needed to integrate emerging technologies into its products and services to differentiate itself from cheaper competitor products, according to the company.
In 2014, Vorwerk released a modernised Thermomix, which came with a chip allowing users to find recipes on the device itself in addition to cutting, mixing, steaming food, and performing many other functions. They could also be shown how to cook with those recipes using on-screen instructions. The device would pre-set times and temperatures and speeds for each step. Cooks just had to add ingredients.
A year later, the company introduced a version for the digital age. Today’s Thermomix is enabled with Internet of things (IoT) technology – one of eight technologies identified by PwC as essential to business transformation.
This provides a gateway to multiple services via its connection to the Internet. Users can download recipes online, and also get help from a growing community of Thermomix enthusiasts who demonstrate features, show off cooking techniques and offer tips and techniques that customers can view right on their food processors’ screens. There’s also an app suggesting users what to cook from a large database of recipes, and then order ingredients to be delivered to their door. This is made possible via partnerships with local delivery companies.
Customers all over the world are hosted on a cloud-based e-commerce platform they can register for. Having a direct connection to customers gives the business insight into their behaviour and helps Vorwerk continually improve products and services.
“We do not just want to produce high-quality household products, we want to develop and distribute the best and digitally supported products that offer customers added value every day,”
Another example is Kobold vacuum cleaners, which now come with an app and can be controlled remotely with a smartphone. Vorwerk is working on adding a remote surveillance feature so that roaming vacuum cleaners can one day be used for home security. Vorwerk is also introducing Industry 4.0 smart manufacturing processes in its production facilities.
The company also invests in start-ups through its Vorwerk Ventures unit, which has invested in more than 15 companies. Strecker admits that the transfer of culture and technology from a start-up to a family business is not easy, but the company is learning as it goes along.
Of course, innovation doesn’t come cheap. The company expects to spend up to €500 million on infrastructure and digital business models, says Mr Strecker. This includes a new production plant and research and development facility in Wuppertal. Staff are being recruited and software developed.
Vorwerk products are still sold in three ways: at parties or involving product demonstrations in a person’s home; in Vorwerk’s shops; and online. The challenge for the company will be how to digitally link these three channels to provide its customers with the easiest access to its products and at the same time optimise the relationship between customers and sales staff in these channels.
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Global Family Business Leader and EMEA Entrepreneurial & Private Business Leader, Partner, PwC Germany
